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Does Coarse Thinking Matter for Option Pricing? Evidence from an Experiment

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2009

Mullainathan et al [Quarterly Journal of Economics, May 2008] present a model of coarse thinking or analogy based thinking. The essential idea behind coarse thinking is that people put situations into categories and the values assigned to attributes in a given situation are affected by the...

Persistent link: https://www.econbiz.de/10005619287

Explaining the Smile in Currency Options: Is it Anchoring?

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2015

An anchoring adjusted currency option pricing formula is developed in which the risk of the underlying currency is used as a starting point which gets adjusted upwards to arrive at the currency call risk. Anchoring bias implies that such adjustments are insufficient. The new formula converges to...

Persistent link: https://www.econbiz.de/10011250911

Rational Interacting Agents and Volatility Clustering: A New Approach

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2007

Here, we show that agents who are ex ante rational, if allowed to interact locally, may generate clustering of volatility. Hence, there is no need to reject the notion of rationality in agent based models.

Persistent link: https://www.econbiz.de/10005260132

Asset Pricing with Second-Order Esscher Transforms.

Monfort, A.; Pegoraro, F. - Banque de France - 2012

historical and the risk-neutral state vector dynamics which is wider than the one implied by a classical exponential …

Persistent link: https://www.econbiz.de/10010815981

International Yield Curves and Principal Components Selection Techniques: An Empirical Assessment

Pegoraro, F.; Siegel, A. F.; Tiozzo Pezzoli, L. - Banque de France - 2014

) methods for selecting a combination of common and local factors that characterize the joint dynamics of multi-country term …

Persistent link: https://www.econbiz.de/10010815988

Regime Switching and Bond Pricing.

Gouriéroux, C.; Monfort, A.; Pegoraro, F.; Renne, J-P. - Banque de France - 2013

This article proposes an overview of the usefulness of the regime switching approach for building various kinds of bond pricing models and of the roles played by the regimes in these models. Both default-free and defaultable bonds are considered. The regimes can be used to capture stochastic...

Persistent link: https://www.econbiz.de/10010816014

Coarse Thinking and Pricing a Financial Option

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2009

Mullainathan et al [Quarterly Journal of Economics, May 2008] present a formalization of the concept of coarse thinking in the context of a model of persuasion. The essential idea behind coarse thinking is that people put situations into categories and the values assigned to attributes in a...

Persistent link: https://www.econbiz.de/10008541492

Coarse thinking, implied volatility, and the valuation of call and put options

Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2010

People think by analogies and comparisons. Such way of thinking, termed coarse thinking by Mullainathan et al [Quarterly Journal of Economics, May 2008] is intuitively very appealing. We derive a new option pricing formula based on the assumption that the market consists of coarse thinkers as...

Persistent link: https://www.econbiz.de/10008530709

No-arbitrage Near-Cointegrated VAR(p) Term Structure Models, Term Premia and GDP Growth.

Jardet, C.; Monfort, A.; Pegoraro, F. - Banque de France - 2009

Macroeconomic questions involving interest rates generally require a reliable joint dynamics of a large set of … reliable predictions of some key variables. Second, it must be able to propose a joint dynamics of some macroeconomic variables … interactions of this large set of variables is based on the statistical notion of New Information Response Function, recently …

Persistent link: https://www.econbiz.de/10005034720

Specification Analysis of International Treasury Yield Curve Factors

Pegoraro, F.; Siegel, A. F.; Tiozzo Pezzoli, L. - Banque de France - 2014

literature regarding not only the total number of latent factors required to explain the joint dynamics of yield curves, but also …

Persistent link: https://www.econbiz.de/10010781568