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Testing the Option Value Theory of Irreversible Investment

Harchaoui, Tarek M.; Lasserre, Pierre - Centre Interuniversitaire de Recherche en Analyse des … - 1999

This paper statistically tests the option theory of irreversible investment under uncertainty. Using contingent claims valuation, we derive the value of options to invest in capacity, where the projects are endogenous to the economic circumstances prevailing at the investment date. We then test...

Persistent link: https://www.econbiz.de/10005100855

Empirical Martingale Simulation for Asset Prices

Duan, Jin-Chuan; Simonato, Jean-Guy - Centre Interuniversitaire de Recherche en Analyse des … - 1995

derivative securities. The modification imposes the martingale property on the simulated sample paths of the underlying asset … price. This procedure is referred to as the empirical martingale simulation (EMS). The EMS ensures that the price estimated … simulation de Monte Carlo. La modification impose la propriété de martingale aux trajectoires simulées de la variable d'état sous …

Persistent link: https://www.econbiz.de/10005627153

Pricing Discretely Monitored Barrier Options by a Markov Chain

Duan, Jin-Chuan; Dudley, Evan; Gauthier, Geneviève; … - Centre Interuniversitaire de Recherche en Analyse des … - 1999

We propose a Markov chain method for pricing discretely monitored barrier options in both the constant and time-varying volatility valuation frameworks. The method uses a time homogeneous Markov Chain to approximate the underlying asset price process. Our approach provides a natural framework...

Persistent link: https://www.econbiz.de/10005100792

Alleviating Coordination Problems and Regulatory Constraints through Financial Risk Management

Boyer, Marcel; Boyer, M. Martin; Garcia, René - Centre Interuniversitaire de Recherche en Analyse des … - 2011

We characterize a firm as a nexus of activities and projects with their associated cash flow distributions across states of the world and time periods. We propose a characterization of the firm where variations in the market price of risk induce adjustments in the value-maximizing combination of...

Persistent link: https://www.econbiz.de/10009643789

The Valuation of Volatility Options

Detemple, Jérôme B.; Osakwe, Carlton - Centre Interuniversitaire de Recherche en Analyse des … - 1999

we examine the properties and hedging behavior of volatility options. Unlike American options, European call options on …

Persistent link: https://www.econbiz.de/10005100856

Derivatives Do Affect Mutual Funds Returns : How and When?

Cao, Charles; Ghysels, Eric; Hatheway, Frank - Centre Interuniversitaire de Recherche en Analyse des … - 2001

This paper is the first to present evidence on the magnitude of derivative use by mutual funds. Using a unique data set of detailed balance sheet information on open-end mutual funds, we characterize the nature of derivative use by these funds. Most mutual funds using derivatives do so to a very...

Persistent link: https://www.econbiz.de/10005100892

The Value of Real and Financial Risk Management

Boyer, Marcel; Boyer, M. Martin; Garcia, René - Centre Interuniversitaire de Recherche en Analyse des … - 2005

. Empirically, we show that a firm's reactiveness to variations in risk prices is linked to its hedging activities. We also argue …

Persistent link: https://www.econbiz.de/10005100941

A Note on Hedging in ARCH and Stochastic Volatility Option Pricing Models

Garcia, René; Renault, Éric - Centre Interuniversitaire de Recherche en Analyse des … - 1997

Recently, Duan (1995) proposed a GARCH option pricing formula and a corresponding hedging formula. In a similar ARCH …-type model for the underlying asset, Kallsen and Taqqu (1994) arrive at a hedging formula different from Duan's , although they … and Taqqu corresponds to the usual concept of hedging in the context of ARCH-type models. We argue however that Duan …

Persistent link: https://www.econbiz.de/10005101110

Option-Implied Measures of Equity Risk

Chang, Bo-Young; Christoffersen, Peter; Jacobs, Kris; … - Centre Interuniversitaire de Recherche en Analyse des … - 2009

Equity risk measured by beta is of great interest to both academics and practitioners. Existing estimates of beta use historical returns. Many studies have found option-implied volatility to be a strong predictor of future realized volatility. We .nd that option-implied volatility and skewness...

Persistent link: https://www.econbiz.de/10004976983

Exact skewness-kurtosis tests for multivariate normality and goodness-of-fit in multivariate regressions with application to asset pricing models

Dufour, Jean-Marie; Khalaf, Lynda; Beaulieu, Marie-Claude - Centre Interuniversitaire de Recherche en Analyse des … - 2003

Dans cet article, nous proposons des tests sur la forme de la distribution des erreurs dans un modèle de régression linéaire multivarié (RLM). Les tests que nous développons sont fonction des résidus obtenus par moindres carrés multivariés, lesquels sont standardisés de façon à ce que...

Persistent link: https://www.econbiz.de/10005100629