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Rationalization of Investment Preference Criteria
Pézier, Jacques - Henley Business School, University of Reading - 2011
The majority of risk adjusted performance measures (RAPM) currently in use – e.g., Treynor ratio, (?/?)) ratio, Omega index, RoVaR, ‘coherent’ preference criteria, etc. – are incompat- ible with any sensible utility function and would be best avoided. We argue instead for the assessment...
Persistent link: https://www.econbiz.de/10010938095
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Revisited multi-moment approximate option pricing models: a general comparison (Part 1)
Jurczenko, Emmanuel; Maillet, Bertrand; Negrea, Bogdan - London School of Economics (LSE) - 2002
expansion to price options when the risk-neutral density is asymmetric and leptokurtic. Amongst them, one can distinguish the …
Persistent link: https://www.econbiz.de/10010745304
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Skewness and kurtosis implied by option prices: a second comment
Jurczenko, Emmanuel; Maillet, Bertrand; Negrea, Bogdan - London School of Economics (LSE) - 2002
Several authors have proposed series expansion methods to price options when the risk-neutral density is asymmetric and … sensitivities of option prices to shifts in skewness and kurtosis using parameter values from Corrado- Su (1996) and Brown …-Robinson (2002), and market data from the French options market. We show that di¤erences between the original, corrected, and our …
Persistent link: https://www.econbiz.de/10011071378
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Evaluating Incentive Options
Xiong, Wei; Sircar, Ronnie - Econometric Society - 2004
We provide an analytical and flexible framework to evaluate incentive options. Our model not only considers vesting … resetting to capture the fact that firms tend to grant more options after existing options are either exercised or become deep … out of the money. By treating the incentive option as a flow of barrier options, we are able to obtain a near …
Persistent link: https://www.econbiz.de/10005329033
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Optimal Hedging with Higher Moments
Brooks, Chris; Cerny, A.; Miffre, J. - Henley Business School, University of Reading - 2006
This study proposes a utility-based framework for the determination of optimal hedge ratios that can allow for the impact of higher moments on the hedging decision. The approach is applied to a set of 20 commodities that are hedged with futures contracts. We find that in sample, the performance...
Persistent link: https://www.econbiz.de/10005357664
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Uncertainty and leveraged Lucas Trees: the cross section of equilibrium volatility risk premia
Vedolin, Andrea - London School of Economics (LSE) - 2012
Volatility risk premia compensate agents for holding assets whose payoffs correlate with times of high return variation. This paper takes a structural approach to explain the cross-section of volatility risk premia of stocks using a Lucas orchard with heterogeneous beliefs, stochastic...
Persistent link: https://www.econbiz.de/10010745732
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Tracking Brazilian Exchange Rate Volatility
Tabak, Benjamin Miranda; Andrade, Sandro Canesso de; … - Econometric Society - 2004
This paper examines the relation between dollar-real exchange rate volatility implied in option prices and subsequent realized volatility. It investigates whether implied volatilities contain information about volatility over the remaining life of the option which is not present in past returns....
Persistent link: https://www.econbiz.de/10005063748
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Maximum Certain Equivalent Excess Returns and Equivalent Preference Criteria Part I - Theory
Pézier, Jacques - Henley Business School, University of Reading - 2007
Generalizations of traditional preference criteria such as the Sharpe ratio, the information ratio and the Jensen alpha are obtained by maximizing a certain equivalent excess return (CER) under relevant investment conditions. They are increasing functions of CERs and therefore equivalent...
Persistent link: https://www.econbiz.de/10008542356
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An Analytic Approximation of the Implied Risk-Neutral Density of American Multi-Asset Options
Arismendi, Juan C.; Prokopczuk, Marcel - Henley Business School, University of Reading - 2014
-neutral measure. For American options and path-dependent options in general, this principle can not be applied. In this paper, we … variance, skewness, and kurtosis swaps. …
Persistent link: https://www.econbiz.de/10010933647
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Commodity Risk Factors and the Cross-Section of Equity Returns
Brooks, Chris; Fernandez-Perez, Adrian; Miffre, Joëlle; … - Henley Business School, University of Reading - 2014
The article examines whether commodity risk is priced in the cross-section of equity returns. Alongside a long-only equally-weighted portfolio of commodity futures, we employ as an alternative commodity risk factor a term structure portfolio that captures the propensity of commodity futures...
Persistent link: https://www.econbiz.de/10010934886