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Boyarchenko, Nina - 2018

Most mortgages in the U.S. are securitized in agency mortgage-backed securities (MBS). Yield spreads on these securities are thus a key determinant of homeowners' funding costs. We study variation in MBS spreads over time and across securities, and document a cross-sectional smile pattern in MBS...

Persistent link: https://www.econbiz.de/10012937951

Arbitrage-Free Models of Stocks and Bonds

Durham, J. Benson - 2014

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...

Persistent link: https://www.econbiz.de/10013061074

No Good Deals — No Bad Models

Boyarchenko, Nina - 2014

Faced with the problem of pricing complex contingent claims, an investor seeks to make her valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced preference functional and extend the "No Good Deals" methodology of Cochrane and Sa a-Requejo (2000) to compute...

Persistent link: https://www.econbiz.de/10013064857

Using Option Prices to Estimate Realignment Probabilities in the European Monetary System

Malz, Allan M. - 2007

Risk reversals are a combination of options from which price information about market expectations of future exchange … future exchange rates from the prices of risk reversals and other currency options. This procedure is used to estimate the ex …

Persistent link: https://www.econbiz.de/10012729907

Option-Implied Probability Distributions and Currency Excess Returns

Malz, Allan M. - 2006

generated by the peso problem approach indicate that jump risk measured by the risk-neutral coefficient of skewness can explain …

Persistent link: https://www.econbiz.de/10012732629

Implied Mortgage Refinancing Thresholds

Bennett, Paul G. - 2006

The optimal prepayment model asserts that rational homeowners would refinance if they can reduce the current value of their liabilities by an amount greater than the refinancing threshold, defined as the cost of carrying the transaction plus the time value of the embedded call option. To compute...

Persistent link: https://www.econbiz.de/10012732763

Y2k Options and the Liquidity Premium in Treasury Bond Markets

Wang, Zhenyu - 2014

shortage. Responding to concerns about this liquidity shortage, the Federal Reserve Bank of New York auctioned Y2K options to … primary dealers. The options gave the dealers the right to borrow from the Fed at a predetermined interest rate. The implied … volatilities of Y2K options and the aggressiveness of demand for these instruments reveal that the Fed's action eased the fears of …

Persistent link: https://www.econbiz.de/10012709606

Traders' Broker Choice, Market Liquidity and Market Structure

Chakravarty, Sugato - 2011

Hedgers and a risk-neutral informed trader choose between a broker who takes a position in the asset (a capital broker) and a broker who does not (a discount broker). The capital broker exploits order flow information to mimic informed trades and offset hedgers' trades, reducing informed profits...

Persistent link: https://www.econbiz.de/10012714535

Equity Volatility Term Premia

Van Tassel, Peter - 2020

and highlights periods of dislocation between the index options and VIX futures markets. Term premia account for a …

Persistent link: https://www.econbiz.de/10012851215

The Term Structure of the Price of Variance Risk

Andries, Marianne - 2015

We estimate the term structure of the price of variance risk (PVR), which helps distinguish between competing asset-pricing theories. First, we measure the PVR as proportional to the Sharpe ratio of short-term holding returns of delta-neutral index straddles; second, we estimate the PVR in a...

Persistent link: https://www.econbiz.de/10013018005