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Barone-Adesi, Giovanni; Dall'O, Hakim - 2010

We provide a new method to derive the state price density per unit probability based on option prices and GARCH model. We derive the risk neutral distribution using the result in Breeden and Litzenberger (1978) and the historical density adapting the GARCH model of Barone-Adesi, Engle, and...

Persistent link: https://www.econbiz.de/10003973040

Conditioning the information in portfolio optimization

Sala, Carlo; Barone-Adesi, Giovanni - 2015

This paper proposes a theoretical analysis on the impacts of using a suboptimal information set on the three main … utility of terminal wealth, we prove the existence of an information premium between what is required by the theory, a … complete information set thus a fully conditional measure, and what is instead achievable by en econometrician. Searching for …

Persistent link: https://www.econbiz.de/10011506342

Testing market efficiency with the pricing kernel

Barone-Adesi, Giovanni; Sala, Carlo - 2019

Market efficiency and the pricing kernel are closely related. A non-monotonic decreasing pricing kernel implies the existence of a trading strategy in contingent claims that stochastically dominates a direct investment in the market. Moreover, a market is assumed to be efficient only if no...

Persistent link: https://www.econbiz.de/10012179592

On the use of equities in target date funds

Barone-Adesi, Giovanni; Platen, Eckhard; Sala, Carlo - 2020

Is it possible to achieve almost riskless investment results in the long run through equity investments? The persistence of low interest rates is spurring research on this question, because of the need to increase yields, while limiting variability of investment results. Target date funds aim to...

Persistent link: https://www.econbiz.de/10012219170

The relationship between credit default swap and cost of equity capital

Barone-Adesi, Giovanni; Brughelli, Moreno - 2010

We want to assess the relationship between the equity and the debt cost of capital. Using a very simple dividend discount model we compute the implied discount rate and we compare it with the corresponding premium on the corporate credit default swap using a cointegration approach. We...

Persistent link: https://www.econbiz.de/10008797690

Barrier option pricing using adjusted transition probabilities

Barone-Adesi, Giovanni (contributor); … - 2007

In the existing literature on barrier options, much effort has been exerted to ensure convergence through placing the barrier in close proximity to, or directly onto, the nodes of the tree lattice. In this paper we show that this may not be necessary to achieve accurate option price...

Persistent link: https://www.econbiz.de/10003549708

A tale of two investors : estimating risk aversion, optimism, and overconfidence

Barone-Adesi, Giovanni; Mancini, Loriano; Shefrin, Hersh - 2012

We combine two approaches to the pricing kernel, one empirical and one theoretical, which relax the restriction that the objective return distribution and risk neutral distribution share the same volatility and higher order moments. The empirical approach provides estimates for the evolution of...

Persistent link: https://www.econbiz.de/10009558362