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Construction and Interpretation of Model-Free Implied Volatility

Andersen, Torben G. - 2007

The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility … more compatible with the related concept of corridor implied volatility (CIV). We provide a comprehensive derivation of the … CIV measure and relate it to MFIV under general assumptions. In addition, we price the various volatility contracts, and …

Persistent link: https://www.econbiz.de/10012465200

Risk Preferences Implied by Synthetic Options

Dew-Becker, Ian; Giglio, Stefano - National Bureau of Economic Research - 2023

The historical returns on equity index options are well known to be strikingly negative. That is typically explained either by investors having convex marginal utility over stock returns (e.g. crash/variance aversion) or by intermediaries demanding a premium for hedging risk. This paper examines...

Persistent link: https://www.econbiz.de/10014436964

Mispricing of S&P 500 Index Options

Constantinides, George M. - 2008

Widespread violations of stochastic dominance by one-month S&P 500 index call options over 1986-2006 imply that a trader can improve expected utility by engaging in a zero-net-cost trade net of transaction costs and bid-ask spread. Although pre-crash option prices conform to the...

Persistent link: https://www.econbiz.de/10012464103

Option Hedging Using Empirical Pricing Kernels

Rosenberg, Joshua V. - 1997

probability, while probabilities are derived from an estimated stochastic volatility model of the form GARCH components with …

Persistent link: https://www.econbiz.de/10012472589

An Empirical Investigation of Continuous-Time Equity Return Models

Andersen, Torben G. - 2001

This paper extends the class of stochastic volatility diffusions for asset returns to encompass Poisson jumps of time … as well as stochastic volatility with a pronounced negative relationship between return and volatility innovations. We …

Persistent link: https://www.econbiz.de/10012470208

Strategic Real Option Exercising and Second-mover Advantage

Dai, Min; Jiang, Zhaoli; Wang, Neng - National Bureau of Economic Research - 2022

Many business opportunities feature second-mover advantages as there are often positive spillovers and externalities from early entrants to followers. We develop a tractable stochastic duopoly entry game with a second-mover advantage. We show that firms engage in a war-of-attrition game with the...

Persistent link: https://www.econbiz.de/10013334369

Perpetual Futures Pricing

Ackerer, Damien; Hugonnier, Julien; Jermann, Urban J. - National Bureau of Economic Research - 2024

Perpetual futures are contracts without expiration date in which the anchoring of the futures price to the spot price is ensured by periodic funding payments from long to short. We derive explicit expressions for the no-arbitrage price of various perpetual contracts, including linear, inverse,...

Persistent link: https://www.econbiz.de/10015072878

Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S&P 500 Options

Santa-Clara, Pedro - 2004

We use a novel pricing model to filter times series of diffusive volatility and jump intensity from S&P 500 index … about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex …

Persistent link: https://www.econbiz.de/10012467775

Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives

Trolle, Anders B. - 2006

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude …-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in … stochastic volatility. The model features correlations between innovations to futures prices and volatility, quasi …

Persistent link: https://www.econbiz.de/10012465916

A General Stochastic Volatility Model for the Pricing and Forecasting of Interest Rate Derivatives

Trolle, Anders B. - 2006

We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates …

Persistent link: https://www.econbiz.de/10012466328