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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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A minimal financial market model
Platen, Eckhard - Sonderforschungsbereich 373, Quantifikation und … - 2000
The paper proposes a financial market model that generates stochastic volatility and stochastic interest rate using a minimal number of factors that characterise the dynamics of the different denominations of the deflator. It models asset prices essentially as functionals of square root and...
Persistent link: https://www.econbiz.de/10010956399
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Risk premia and financial modelling without measure transformation
Platen, Eckhard - Sonderforschungsbereich 373, Quantifikation und … - 2000
This paper describes a financial market modelling framework that exploits the notion of a deflator . The denominations of the deflator measured in units of primary assets form a minimal set of basic financial quantities that completely specify the overall market dynamics, where deflated asset...
Persistent link: https://www.econbiz.de/10010956550
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A benchmark model for financial markets
Platen, Eckhard - Sonderforschungsbereich 373, Quantifikation und … - 2001
This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices and portfolios is derived. Furthermore, the short rate is...
Persistent link: https://www.econbiz.de/10010956610
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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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Quantile hedging
Föllmer, Hans; Leukert, Peter - Sonderforschungsbereich 373, Quantifikation und … - 1998
In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...
Persistent link: https://www.econbiz.de/10010983573
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Efficient hedging for a complete jump-diffusion model
Kirch, Michael; Krutchenko, R. N.; Melnikov, Aleksandr V. - Sonderforschungsbereich 373, Quantifikation und … - 2002
This paper is devoted to the problem of hedging contingent claims in the framework of a complete two-factor jump-diffusion model. In this context, it is well understood that every contingent claim can be hedged perfectly if one invests the unique arbitrage-free price. Based on the results of H....
Persistent link: https://www.econbiz.de/10010983604
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Efficient hedging: Cost versus shortfall risk
Föllmer, Hans; Leukert, Peter - Sonderforschungsbereich 373, Quantifikation und … - 1999
An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often quite expensive, we study partial hedges, which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal...
Persistent link: https://www.econbiz.de/10010983650
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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