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Estimating the probability of large negative stock market
Kostov, Philip; McErlean, Seamus - EconWPA - 2004
Correct assessment of the risks associated with likely economic outcomes is vital for effective decision making. The objective of investment in the stock market is to obtain positive market returns. The risk, however, is the danger of suffering large negative market returns. A variety of...
Persistent link: https://www.econbiz.de/10005413216
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Static Hedging of Standard Options
Carr, Peter; Wu, Liuren - EconWPA - 2004
We consider the hedging of options when the price of the underlying asset is always exposed to the possibility of jumps … hedge in the presence of jumps cannot be improved upon by increasing the rebalancing frequency. In contrast, the superior … empirical support for the existence of jumps of random size in the movement of the S&P 500 index. We also find that the …
Persistent link: https://www.econbiz.de/10005413226
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Specification Analysis of Option Pricing Models Based on Time- Changed Levy Processes
Huang, Jingzhi; Wu, Liuren - EconWPA - 2004
We analyze the specifications of option pricing models based on time- changed Levy processes. We classify option pricing models based on the structure of the jump component in the underlying return process, the source of stochastic volatility, and the specification of the volatility process...
Persistent link: https://www.econbiz.de/10005077041
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A Statistical Analysis of Intraday Liquidity, Returns and Volatility of an Individual Stock from the Istanbul Stock Exchange
Ekinci, Cumhur - EconWPA - 2003
This paper seeks whether the intraday patterns observed in most stock markets hold for an individual stock from the Istanbul Stock Exchange where the trading ceases for two hours during lunchtime. It investigates the most treated topics in market finance like liquidity, returns and volatility...
Persistent link: https://www.econbiz.de/10005561617
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Variance Risk Premia
Carr, Peter; Wu, Liuren - EconWPA - 2004
We propose a direct and robust method for quantifying the variance risk premium on financial assets. We theoretically and numerically show that the risk-neutral expected value of the return variance, also known as the variance swap rate, is well approximated by the value of a particular...
Persistent link: https://www.econbiz.de/10005413197
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Time-varying Beta Risk of Pan-European Sectors: A Comparison of Alternative Modeling Techniques
Mergner, Sascha - EconWPA - 2005
This paper investigates the time-varying behavior of systematic risk for eighteen pan-European industry portfolios. Using weekly data over the period 1987-2005, three different modeling techniques in addition to the standard constant coefficient model are employed: a bivariate t- GARCH(1,1)...
Persistent link: https://www.econbiz.de/10005076972
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Time-varying Beta Risk of Pan-European Industry Portfolios: A Comparison of Alternative Modeling Techniques
Mergner, Sascha; Bulla, Jan - EconWPA - 2005
This paper investigates the time-varying behavior of systematic risk for eighteen pan-European sectors. Using weekly data over the period 1987- 2005, four different modeling techniques in addition to the standard constant coefficient model are employed: a bivariate t-GARCH(1,1) model, two Kalman...
Persistent link: https://www.econbiz.de/10005077020
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Valuation of Six Asian Stock Markets: Financial System Identification in Noisy Environments
LOS, CORNELIS A. - EconWPA - 2004
The open financial economic systems of six Asian countries Taiwan, Malaysia, Singapore, Philippines, Indonesia and Japan - over the period 1986 through 1995 are identified from empirical data to determine how their stock markets, economies and financial markets are interrelated. The objective is...
Persistent link: https://www.econbiz.de/10005134813
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Looking Forward to Pricing Options from Binomial Trees
Villani, Dario; Ruckenstein, Andrei E. - EconWPA - 2000
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. Our reformulation allows us to write closed-form expressions for the value of European and...
Persistent link: https://www.econbiz.de/10005134937
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What Type of Process Underlies Options? A Simple Robust Test
Carr, Peter; Wu, Liuren - EconWPA - 2002
We develop a simple robust test for the presence of continuous and discontinuous (jump) com­ponents in the price of an asset underlying an option. Our test examines the prices of at­the­money and out­of­the­money options as the option maturity approaches zero. We show that these prices...
Persistent link: https://www.econbiz.de/10005134834