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Volatility Risk Premia and Exchange Rate Predictability

Della Corte, Pasquale; Ramadorai, Tarun; Sarno, Lucio - C.E.P.R. Discussion Papers - 2013

We investigate the predictive information content in foreign exchange volatility risk premia for exchange rate returns …. The volatility risk premium is the difference between realized volatility and a model-free measure of expected volatility … that is derived from currency options, and reflects the cost of insurance against volatility ‡fluctuations in the …

Persistent link: https://www.econbiz.de/10011084715

The Effect of Introducing a Non-redundant Derivative on the Volatility of Stock-Market Returns

Bhamra, Harjoat Singh; Uppal, Raman - C.E.P.R. Discussion Papers - 2006

We study the effect of introducing a new security, such as a non-redundant derivative, on the volatility of stock … increases the volatility of stock-market returns. …

Persistent link: https://www.econbiz.de/10005114422

Option-Based Credit Spreads

Culp, Christopher L.; Nozawa, Yoshio; Veronesi, Pietro - C.E.P.R. Discussion Papers - 2014

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options ("pseudo bonds") closely match the properties of traded corporate bonds. Pseudo bonds...

Persistent link: https://www.econbiz.de/10011145468

Carry

Koijen, Ralph; Moskowitz, Tobias J; Pedersen, Lasse Heje; … - C.E.P.R. Discussion Papers - 2013

, and volatility risks, its performance presents a challenge to asset pricing models. …

Persistent link: https://www.econbiz.de/10011083673

Variance risk, financial intermediation, and the cross-section of expected option returns

Schürhoff, Norman; Ziegler, Alexandre - C.E.P.R. Discussion Papers - 2011

, the volatility mispricing puzzle, and the significant returns earned on various option portfolio strategies. Our results …

Persistent link: https://www.econbiz.de/10008854530

Too-Systemic-To-Fail: What Option Markets Imply About Sector-wide Government Guarantees

Kelly, Bryan; Lustig, Hanno; van Nieuwerburgh, Stijn - C.E.P.R. Discussion Papers - 2012

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets. A large amount of aggregate tail risk is missing from the price of financial sector crash insurance during the financial crisis. The difference in costs of out-of-the-money put...

Persistent link: https://www.econbiz.de/10011083289

Improving Portfolio Selection Using Option-Implied Volatility and Skewness

DeMiguel, Victor; Plyakha, Yuliya; Uppal, Raman; … - C.E.P.R. Discussion Papers - 2010

weights, one needs to estimate for each stock its volatility, correlations with all other stocks, and expected return. Our … contained in the volatility risk premium and option-implied skewness increases substantially Sharpe ratios and certainty …

Persistent link: https://www.econbiz.de/10008530360

Performance Maximization of Actively Managed Funds

Guasoni, Paolo; Huberman, Gur; Wang, Zhenyu - C.E.P.R. Discussion Papers - 2010

Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...

Persistent link: https://www.econbiz.de/10008468707

Corporate Bond Valuation and Hedging with Stochastic Interest Rates and Endogenous Bankruptcy

Acharya, Viral V; Carpenter, Jennifer - C.E.P.R. Discussion Papers - 2002

This Paper analyses corporate bond valuation and optimal call and default rules when interest rates and firm value are stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate bond sensitivity to interest rates and firm...

Persistent link: https://www.econbiz.de/10005123555

Liquidity Risk and Correlation Risk: A Clinical Study of the General Motors and Ford Downgrade of May 2005

Acharya, Viral V; Schaefer, Stephen M; Zhang, Yili - C.E.P.R. Discussion Papers - 2007

The GM and Ford downgrade to junk status during May 2005 caused a wide-spread sell-off in their corporate bonds. Using a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market-makers, as evidenced in the significant imbalance in their quotes...

Persistent link: https://www.econbiz.de/10005123999

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