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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
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Measuring and Modelling Variation in the Risk-Return Trade-off
Lettau, Martin; Ludvigson, Sydney - C.E.P.R. Discussion Papers - 2001
? Can stock return predictability be explained by changes in stock market volatility? How does the mean return per unit risk … predictor of both the mean and volatility of excess stock market returns. We characterize the risk-return tradeoff as the … negatively linked to variation in market volatility, at odds with leading asset pricing models. Since the conditional volatility …
Persistent link: https://www.econbiz.de/10005498159
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CDS Auctions
Chernov, Mikhail; Gorbenko, Alexander; Makarov, Igor - C.E.P.R. Discussion Papers - 2011
We analyze credit default swap settlement auctions theoretically and evaluate them empirically. In our theoretical analysis, we show that the current auction design may not result in the fair bond price and suggest modifications to the auction design to minimize mispricing. In our empirical...
Persistent link: https://www.econbiz.de/10009144729
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Asset Prices and International Spillovers: An Empirical Investigation
Sarno, Lucio; Valente, Giorgio - C.E.P.R. Discussion Papers - 2004
This Paper proposes a vector equilibrium correction model of stock returns that exploits the information in the futures market, while allowing for both regime-switching behaviour and international spillovers across stock market indices. Using data for three major stock market indices since 1989,...
Persistent link: https://www.econbiz.de/10005114365
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Limits to Arbitrage and Hedging: Evidence from Commodity Markets
Acharya, Viral V; Lochstoer, Lars; Ramadorai, Tarun - C.E.P.R. Discussion Papers - 2009
We build an equilibrium model with commodity producers that are averse to future cash flow variability, and hedge using futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk-taking. Increases (decreases) in producers’...
Persistent link: https://www.econbiz.de/10005016244
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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
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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
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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
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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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Pricing Credit Derivatives with Rating Transitions
Acharya, Viral V; Das, Sanjiv Ranjan; Sundaram, Rangarajan K - C.E.P.R. Discussion Papers - 2002
We develop a model for pricing risky debt and valuing credit derivatives that is easily calibrated to existing variables. Our approach is based on expanding the Heath-Jarrow-Morton (1990) term-structure model and its extension, the Das-Sundaram (2000) model to allow for defaultable debt with...
Persistent link: https://www.econbiz.de/10005124036