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Spurious Regression, Cointegration, and Near Cointegration: A Unifying Approach

Haldrup, Niels; Jansson, Michael - Tinbergen Institute - 1999

on this representation, a notion of near cointegration is proposed and three separate applications of the model of near … cointegration are provided. As a first application, we give analytical corroboration of the conjecture that the finite sample … coefficient. Hence, the notion of near cointegration helps to bridge the gap between the polar cases of spurious regression and …

Persistent link: https://www.econbiz.de/10005137044

For Better and for Worse - How Unpaid Bride Wealth provides Security

Hoogeveen, Hans - Tinbergen Institute - 2000

The obligation to pay bride wealth at marriage is usually associated with the continuation of the lineage or considered a compensation for the loss of labor for the family that provides the bride. In this paper a different interpretation is advanced. The obligation to pay of bride wealth is seen...

Persistent link: https://www.econbiz.de/10005144474

The Joint Estimation of Term Structures and Credit Spreads

Houweling, Patrick; Hoek, Jaap; Kleibergen, Frank - Tinbergen Institute - 1999

We present a new framework for the joint estimation of the default-free government term structure and corporate credit spread curves. By using a data set of liquid, German mark denominated bonds, we show that this yields more realistic spreads than traditionally obtained spread curves that...

Persistent link: https://www.econbiz.de/10005209449

Optimal Fourier Inversion in Semi-analytical Option Pricing

Lord, Roger; Kahl, Christian - Tinbergen Institute - 2006

At the time of writing this article, Fourier inversion is the computational method of choice for a fast and accurate calculation of plain vanilla option prices in models with an analytically available characteristic function. Shifting the contour of integration along the complex plane allows for...

Persistent link: https://www.econbiz.de/10005209502

Pricing and Hedging Guaranteed Annuity Options via Static Option Replication

Pelsser, Antoon - Tinbergen Institute - 2002

In this paper we derive a market value for Guaranteed Annuity Option using martingale modeling techniques. Furthermore, we show how to construct a static replicating portfolio of vanilla interest rate swaptions that replicates the Guaranteed Annuity Option. Finally, we illustrate with historical...

Persistent link: https://www.econbiz.de/10005144511

A Comparison of Biased Simulation Schemes for Stochastic Volatility Models

Lord, Roger; Koekkoek, Remmert; Dijk, Dick van - Tinbergen Institute - 2006

When using an Euler discretisation to simulate a mean-reverting square root process, one runs into the problem that while the process itself is guaranteed to be nonnegative, the discretisation is not. Although an exact and efficient simulation algorithm exists for this process, at present this...

Persistent link: https://www.econbiz.de/10005136945

Why the Rotation Count Algorithm works

Lord, Roger; Kahl, Christian - Tinbergen Institute - 2006

The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all of its extensions, involve multivalued functions such as the complex logarithm. If we restrict the logarithm to its principal branch, as is done in most software packages,...

Persistent link: https://www.econbiz.de/10005137076

The Forward Premium Puzzle only emerges gradually

Bernoth, Kerstin; Hagen, Jürgen von; Vries, Casper G. de - Tinbergen Institute - 2007

The forward premium puzzle (FPP) is the negative correlation between the forward premium and the realized exchange rate return at maturities of a month and beyond. Some recent evidence shows that at maturities of multiple years and at the highest intra day frequency the correlation is positive...

Persistent link: https://www.econbiz.de/10005137192

Black Scholes for Portfolios of Options in Discrete Time: the Price is Right, the Hedge is wrong

Peeters, Bas; Dert, Cees L.; Lucas, André - Tinbergen Institute - 2003

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different...

Persistent link: https://www.econbiz.de/10005137343

Is Power Production Flexibility a Substitute for Storability? Evidence from Electricity Futures Prices

Kilic, Mehtap; Huisman, Ronald - Tinbergen Institute - 2010

Electricity is not storable. As a consequence, electricity demand and supply need to be in balance at any moment in time as a shortage in production volume cannot be compensated with supply from inventories. However, if the installed power supply capacity is very flexible, variation in demand...

Persistent link: https://www.econbiz.de/10008838593