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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
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
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
We develop generalised indirect inference procedures that handle equality and inequality constraints on the auxiliary model parameters. We also show that the asymptotic efficiency of such estimators can never decrease by explicitly taking into account Lagrange multipliers associated with...
Persistent link: https://www.econbiz.de/10010745065
Ambivalence in the regulatory definition of capital adequacy for credit risk has recently stirred the financial services industry to collateral loan obligations (CLOs) as an important balance sheet management tool. CLOs represent a specialised form of Asset-Backed Securitisation (ABS), with...
Persistent link: https://www.econbiz.de/10010745131
Following the framework of Cetin et al. (finance stoch. 8:311-341, 2004), we study the problem of super-replication in the presence of liquidity costs under additional restrictions on the gamma of the hedging strategies in a generalized black-scholes economy. We find that the minimal...
Persistent link: https://www.econbiz.de/10010745343
We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We...
Persistent link: https://www.econbiz.de/10010746600
This paper reviews fundamental concepts in environmental economics and explores theoretical results regarding the choice of the key policy instruments for the control of externalities: taxes, subsidies and marketable permits. The paper explains why today market mechanisms are increasingly being...
Persistent link: https://www.econbiz.de/10010746619
Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first a reducedform model from an equilibrium model and thereby explains how existing reducedform models are related to equilibrium models. Second, by...
Persistent link: https://www.econbiz.de/10011071177
Market liquidity is typically characterized by a number of ad hoc metrics, such as depth, volume, bid-ask spreads etc. No general coherent denition seems to exist, and few attempts have been made to justify the existing metrics on welfare grounds. In this paper we propose a welfare-based...
Persistent link: https://www.econbiz.de/10010884503