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Nielsen, Lars Tyge - 2019

This paper studies the concept of instantaneous arbitrage in continuous time and its relation to the instantaneous CAPM …. Absence of instantaneous arbitrage is equivalent to the existence of a trading strategy which satisfies the CAPM beta pricing … relation in place of the market. Thus the difference between the arbitrage argument and the CAPM argument in Black and Scholes …

Persistent link: https://www.econbiz.de/10012894845

The Virtues and Vices of Equilibrium and the Future of Financial Economics

Farmer, J. Doyne; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2008

The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then...

Persistent link: https://www.econbiz.de/10004976721

Hedging for the Long Run

Platen, Eckhard; Hulley, Hardy - Finance Discipline Group, Business School - 2008

fulfils a minimal no-arbitrage condition for an economically viable financial market. Furthermore, we demonstrate that … illustrating and clarifying several points on asset price bubbles and the economics of arbitrage. …

Persistent link: https://www.econbiz.de/10004984487

Arbitrage pricing and equilibrium pricing : compatibility conditions.

Napp, Clotilde; Jouini, Elyès - Université Paris-Dauphine - 2001

The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete … financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator …

Persistent link: https://www.econbiz.de/10008832173

Arbitrage pricing and equilibrium pricing : compatibility conditions

Napp, Clotilde; Jouini, Elyès - Université Paris-Dauphine (Paris IX) - 2001

Persistent link: https://www.econbiz.de/10010707894

Market efficiency and limits to arbitrage : evidence from the Volkswagen short squeeze

Allen, Franklin; Haas, Marlene; Nowak, Eric; Tengulov, Angel - 2018

On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen's stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the...

Persistent link: https://www.econbiz.de/10011875647

Squeezing shorts through social news platforms

Allen, Franklin; Nowak, Eric; Pirovano, Matteo; … - 2021 - This draft: April 12, 2021

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by retail...

Persistent link: https://www.econbiz.de/10012502167

Arbitrage free approximations to candidate volatility surface quotations

Madan, Dilip B.; Schoutens, Wim - In: Journal of risk and financial management : JRFM 12 (2019) 2/69, pp. 1-21

It is argued that the growth in the breadth of option strikes traded after the financial crisis of 2008 poses difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain approximations are proposed as an alternative. They are shown...

Persistent link: https://www.econbiz.de/10012022144

Pricing Forward Start Options in Models Based on (Time-Changed) Levy Processes

Beyer, Philipp; Kienitz, Joerg - 2009

Options depending on the forward skew are very popular. One such option is the forward starting call option - the basic building block of a cliquet option. Widely applied models to account for the forward skew dynamics to price such options include the Heston model, the Heston-Hull-White model...

Persistent link: https://www.econbiz.de/10014211805

An Equilibrium Pricing for OTC Derivatives with Collateralization. Application of Economic Premium Principle

Takino, Kazuhiro - 2016

In this article, we propose an equilibrium pricing rule for the contingent claims by applying the economic premium principle initiated by Buhlmann (1980). The derivative markets in our model are over-the-counter (OTC) markets and have counterparty risks. We reconstruct the economic premium...

Persistent link: https://www.econbiz.de/10012999558