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Level Shifts in Volatility and the Implied-Realized Volatility Relation
Christensen, Bent Jesper; Magistris, Paolo Santucci de - School of Economics and Management, University of Aarhus - 2010
We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization to the...
Persistent link: https://www.econbiz.de/10008549066
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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 …
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
widespread skewness in index options. Finally, our model reveals a nonlinear relationship between bond and option prices that …
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
information available in options traded on futures. Second, performance assessment in the previous literature has primarily … hedging-performance of the models. Third, we model the futures surface rather than the spot price process, and from the no … previous literature uses futures data for investigating the relationship between inventory and volatility, we use the …
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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Construction and Interpretation of Model-Free Implied Volatility
Andersen, Torben G.; Bondarenko, Oleg - School of Economics and Management, University of Aarhus - 2007
index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the …
Persistent link: https://www.econbiz.de/10005440033
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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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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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Dynamic Estimation of Volatility Risk Premia and Investor Risk Aversion from Option-Implied and Realized Volatilities
Bollerslev, Tim; Gibson, Michael; Zhou, Hao - School of Economics and Management, University of Aarhus - 2007
This paper proposes a method for constructing a volatility risk premium, or investor risk aversion, index. The method is intuitive and simple to implement, relying on the sample moments of the recently popularized model-free realized and option-implied volatility measures. A small-scale Monte...
Persistent link: https://www.econbiz.de/10005114112