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Risk premia in energy markets
Veraart, Almut E. D.; Veraart, Luitgard A. M. - School of Economics and Management, University of Aarhus - 2013
situation changes in the case of electricity. Hence, in an empirical study based on electricity spot prices and futures from the …
Persistent link: https://www.econbiz.de/10010851272
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Oil Volatility Risk and Expected Stock Returns
Christoffersen, Peter; Xuhui (Nick) Pan - School of Economics and Management, University of Aarhus - 2014
After the financialization of commodity futures markets in 2004-05 oil volatility has become a strong predictor of …
Persistent link: https://www.econbiz.de/10011145697
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Efficient and accurate log-Lévi approximations to Lévi driven LIBOR models
Papapantoleon, Antonis; Schoenmakers, John; Skovmand, David - School of Economics and Management, University of Aarhus - 2011
The LIBOR market model is very popular for pricing interest rate derivatives, but is known to have several pitfalls. In addition, if the model is driven by a jump process, then the complexity of the drift term is growing exponentially fast (as a function of the tenor length). In this work, we...
Persistent link: https://www.econbiz.de/10009148813
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Stock Return and Cash Flow Predictability: The Role of Volatility Risk
Bollerslev, Tim; Xu, Lai; Zhou, Hao - School of Economics and Management, University of Aarhus - 2012
We examine the joint predictability of return and cash flow within a present value framework, by imposing the implications from a long-run risk model that allow for both time-varying volatility and volatility uncertainty. We provide new evidence that the expected return variation and the...
Persistent link: https://www.econbiz.de/10010851207
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The Factor Structure in Equity Options
Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris - School of Economics and Management, University of Aarhus - 2013
Principal component analysis of equity options on Dow-Jones firms reveals a strong factor structure. The first principal component explains 77% of the variation in the equity volatility level, 77% of the variation in the equity option skew, and 60% of the implied volatility term structure across...
Persistent link: https://www.econbiz.de/10010851218
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Rare Disasters and Credit Market Puzzles
Christoffersen, Peter; Du, Du; Elkamhi, Redouane - School of Economics and Management, University of Aarhus - 2013
We embed systematic default, procyclic recovery rates and habit persistance into a model with a slight possibility of a macroeconomic disaster of reasonable magnitude. We derive analytical solutions for defaultable bond prices and show that a single set of structural parameters calibrated to the...
Persistent link: https://www.econbiz.de/10010851248
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Commodity derivatives pricing with inventory effects
Bach, Christian; Dziubinski, Matt P. - School of Economics and Management, University of Aarhus - 2012
previous literature uses futures data for investigating the relationship between inventory and volatility, we use the … information available in options traded on futures. Second, performance assessment in the previous literature has primarily … evolved around explaining moments of data or forecasting prices of futures. Instead, we assess the performance of our model by …
Persistent link: https://www.econbiz.de/10009652368
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Risk and Return: Long-Run Relationships, Fractional Cointegration, and Return Predictability
Bollerslev, Tim; Osterrieder, Daniela; Sizova, Natalia; … - School of Economics and Management, University of Aarhus - 2011
The dynamic dependencies in financial market volatility are generally well described by a long-memory fractionally integrated process. At the same time, the volatility risk premium, defined as the difference between the ex-post realized volatility and the market’s ex-ante expectation thereof,...
Persistent link: https://www.econbiz.de/10009399368
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Adding and Subtracting Black-Scholes: A New Approach to Approximating Derivative Prices in Continuous Time Models
Kristensen, Dennis; Mele, Antonio - School of Economics and Management, University of Aarhus - 2009
This paper develops a new systematic approach to implement approximate solutions to asset pricing models within multi-factor diffusion environments. For any model lacking a closed-form solution, we provide a solution obtained by expanding the analytically intractable model around a known...
Persistent link: https://www.econbiz.de/10005787546
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Volatility in Equilibrium: Asymmetries and Dynamic Dependencies
Bollerslev, Tim; Sizova, Natalia; Tauchen, George - School of Economics and Management, University of Aarhus - 2009
Stock market volatility clusters in time, carries a risk premium, is fractionally integrated, and exhibits asymmetric leverage effects relative to returns. This paper develops a first internally consistent equilibrium based explanation for these longstanding empirical facts. The model is cast in...
Persistent link: https://www.econbiz.de/10005787548