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Implied Exchange Rate Distributions : Evidence from OTC Option Markets
Campa, Jose M. - 1997
This paper uses a rich new data set of option prices on the dollar-mark, dollar-yen, and key EMS cross-rates to extract the entire risk-neutral probability density function (pdf) over horizons of one and three months. We compare three alternative smoothing methods---cubic splines, an implied...
Persistent link: https://www.econbiz.de/10012472635
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Expectations of Returns and Expected Returns
Greenwood, Robin - 2013
We analyze time-series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However,...
Persistent link: https://www.econbiz.de/10012459979
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Risk Preferences Implied by Synthetic Options
Dew-Becker, Ian; Giglio, Stefano - National Bureau of Economic Research - 2023
options to also have negative excess returns. Empirically, synthetic options have CAPM alphas near zero over the period 1926 …
Persistent link: https://www.econbiz.de/10014436964
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Expectations Data in Asset Pricing
Adam, Klaus; Nagel, Stefan - National Bureau of Economic Research - 2022
Asset prices reflect investors' subjective beliefs about future cash flows and prices. In this chapter, we review recent research on the formation of these beliefs and their role in asset pricing. Return expectations of individual and professional investors in surveys differ markedly from those...
Persistent link: https://www.econbiz.de/10013191072
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Disagreement and Asset Prices
Carlin, Bruce I. - 2012
How do differences of opinion affect asset prices? Do investors earn a risk premium when disagreement arises in the market? Despite their fundamental importance, these questions are among the most controversial issues in finance. In this paper, we use a novel data set that allows us to directly...
Persistent link: https://www.econbiz.de/10012460041
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Analyzing Investments Whose Histories Differ in Length
Stambaugh, Robert F. - 1997
-history assets, but for the shorter-history assets as well. To account for the remaining parameter uncertainty, or estimation risk … the value of using the combined sample of histories and accounting for estimation risk, as compared to truncating the … sample to produce equal-length histories or ignoring estimation risk by using maximum-likelihood estimates …
Persistent link: https://www.econbiz.de/10012472906
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Option Hedging Using Empirical Pricing Kernels
Rosenberg, Joshua V. - 1997
This paper develops a method for option hedging which is consistent with time-varying preferences and probabilities. The preferences are expressed in the form of an empirical pricing kernel (EPK), which measures the state price per unit probability, while probabilities are derived from an...
Persistent link: https://www.econbiz.de/10012472589
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Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices
Ait-Sahalia, Yacine - 1995
Implicit in the prices of traded financial assets are Arrow- Debreu state prices or, in the continuous-state case, the state-price density (SPD). We construct an estimator for the SPD implicit in option prices and derive an asymptotic sampling theory for this estimator to gauge its accuracy. The...
Persistent link: https://www.econbiz.de/10012473518
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Option-Implied Spreads and Option Risk Premia
Culp, Christopher L.; Gandhi, Mihir; Nozawa, Yoshio; … - National Bureau of Economic Research - 2021
We propose implied spreads (IS) and normalized implied spreads (NIS) as simple measures to characterize option prices. IS is the credit spread of an option's implied bond, the portfolio long a risk-free bond and short a put option. NIS normalizes IS by the risk-neutral default probability and...
Persistent link: https://www.econbiz.de/10012585425
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Heterogeneous-Expectations Model of the Value of Bonds Bearing Call Options
Bodie, Zvi - 1977
This paper develops a dynamic programming model of the optimal refunding strategy and the corresponding value of a callable bond. The model differs from previous work on this subject primarily in that it explicitly admits the possibility of differences between the issuer's expectations of future...
Persistent link: https://www.econbiz.de/10012478918