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Ambiguity Aversion and the Term Structure of Interest Rates

Gagliardini, Patrick; Porchia, Paolo; Trojani, Fabio - Institut für Schweizerisches Bankwesen <Zürich> - 2007

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reﬂect a premium for ambiguity, which is observationally distinct from the risk...

Persistent link: https://www.econbiz.de/10005858032

Foreign Direct Investment and Exchange Rate Volatility: a Non-Linear Story

Jeanneret, Alexandre - Institut für Schweizerisches Bankwesen <Zürich> - 2007

volatility: the effct is negative for low levels of uncertainty and positive for higher levels. I also construct a real-options … predictions and the theoretical approach stand in stark contrast to the real-options literature, which implies a negative relation … the influence of exchange rate volatility on the expected investment level. The paper therefore extends the real-options …

Persistent link: https://www.econbiz.de/10005858054

Stock Returns in Mergers and Acquisitions

Hackbarth, Dirk; Morellec, Erwan - Institut für Schweizerisches Bankwesen <Zürich> - 2006

This paper develops a real options framework to analyze the behavior of stock returns in mergers and acquisitions. In …

Persistent link: https://www.econbiz.de/10005858239

Financing and Takeovers

Morellec, Erwan; Zhdanov, Alexei - Institut für Schweizerisches Bankwesen <Zürich> - 2006

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...

Persistent link: https://www.econbiz.de/10005858240

Optimal Investment in Variance Swaps Under Stochastic Volatility

Egloff, Daniel; Leippold, Markus; Wu, Liuren - Institut für Schweizerisches Bankwesen <Zürich> - 2006

With increasing appreciation of the fact that stock return variance is stochastic and variance risk is heavily priced, the industry has created a series of variance derivative products to span variance risk. The variance swap contract is the most actively traded of these products. It pays at...

Persistent link: https://www.econbiz.de/10005858375

Term structures of implied volatilities : Absence of arbitrage and existence results

Schweizer, Martin; Wissel, Johannes - Institut für Schweizerisches Bankwesen <Zürich> - 2006

-time framework with one stock, one bank account and a family of European options for all maturities with a fixed payoff function h …

Persistent link: https://www.econbiz.de/10005858725

Portfolio Losses and the Term Structure of Loss Transition Rates : A New Methodology for the Pricing of Portfolio Credit Derivates

Schönbucher, Philipp J. - Institut für Schweizerisches Bankwesen <Zürich> - 2005

In this paper, we present a model for the joint stochastic evolution of the cumulative loss process of a credit portfolio and of its probability distribution. At any given time, the loss distribution of the portfolio is represented using forward transition rates, i.e. the transition rates of a...

Persistent link: https://www.econbiz.de/10005858734

Libor Market Model with Regime-Switching Volatility

Elliott, Robert; Valchev, Stoyan - Institut für Schweizerisches Bankwesen <Zürich> - 2004

This paper provides regime-switching stochastic volatility extensions of the LIBOR market model. First, the instantaneous forward LIBOR volatility is modulated by a continuous time homogeneous Markov chain. In a second parameterization, the volatility is modelled by a square root process with a...

Persistent link: https://www.econbiz.de/10005858810

Multi-Currency Quadratic Models : Theory and Evidence

Leippold, Markus; Wu, Liuren - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

The challenge of international term structure models is to simultaneously account for the properties of interest rate term structures and foreign exchange rates within an arbitrage-free framework. We extend the quadratic term structure models proposed in Leippold and Wu (2002) to multiple...

Persistent link: https://www.econbiz.de/10005858853

Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models

Leippold, Markus; Wiener, Zvi - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

In this paper we discuss the implementation of general one-factor short rate models with a trinomial tree. Taking the Hull-White model as a starting point, our contribution is threefold. First, we show how trees can be spanned using a set of general branching processes. Secondly, we improve...

Persistent link: https://www.econbiz.de/10005858854