Showing 1 - 10 of 22
One of the most critical concerns that customers have voiced in the debate over real-time retail electricity pricing is … that they would be exposed to risk from fluctuations in their electricity cost. The concern seems to be that a customer … very simple hedging strategies can eliminate more than 80% of the bill volatility that would otherwise occur. Far from …
Persistent link: https://www.econbiz.de/10012466141
volatility associated with current dynamic hedging strategies. There will thus be less information transmitted to those people … trades implied by the dynamic hedging strategies, In effect, the stocks' future price volatility can rise because of a … current lack of information about the extent to which dynamic hedging strategies are in place …
Persistent link: https://www.econbiz.de/10012476711
Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock-return volatility increases with unused commitments, but the...
Persistent link: https://www.econbiz.de/10012466434
results of the EU's ESTORAGE project, this paper studies the limits of Germany's energy revolution in view of the volatility …
Persistent link: https://www.econbiz.de/10012456210
Agricultural and energy commodity prices have traditionally exhibited relatively low correlation. However, recent … increases in biofuel production have altered the agriculture-energy relationship in a fundamental way. This increase has drawn …
Persistent link: https://www.econbiz.de/10012461833
The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...
Persistent link: https://www.econbiz.de/10012465200
We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates. It features correlations between innovations to forward rates and volatilities, quasi-analytical prices of zero-coupon bond options and dynamics of the forward rate curve, under...
Persistent link: https://www.econbiz.de/10012466328
By applying stochastic dominance arguments, upper bounds on the reservation write price of European calls and puts and lower bounds on the reservation purchase price of these derivatives are derived in the presence of proportional transaction costs incurred in trading the underlying security....
Persistent link: https://www.econbiz.de/10012469848
Real-time pricing (RTP) of electricity would improve allocative efficiency and limit wholesalers' market power …, both within- and across-days, in the quantity of electricity demanded. We estimate the short-run impacts of this reduction …
Persistent link: https://www.econbiz.de/10012465138
What do academics have to offer market risk management practitioners in financial institutions? Current industry practice largely follows one of two extremely restrictive approaches: historical simulation or RiskMetrics. In contrast, we favor flexible methods based on recent developments in...
Persistent link: https://www.econbiz.de/10012467618