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Market imperfections, equilibrium and arbitrage
Jouini, Elyès - EconWPA - 2003
frictionless. The main result is that a price process is arbitrage free (or, equivalently, compatible with some equilibrium) if and … by arbitrage follows from there. Contingent claims can be priced by taking their expected value with respect to an … equivalent martingale measure. If this value is unique, the claim is said to be priced by arbitrage. The new probabilities can be …
Persistent link: https://www.econbiz.de/10005076947
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The Degree of Stability of Price Diffusion
Los, Cornelis A. - EconWPA - 2005
The distributional form of financial asset returns has important implications for the theoretical and empirical analyses in economics and finance. It is now a well-established fact that financial return distributions are empirically nonstationary, both in the weak and the strong sense. One first...
Persistent link: https://www.econbiz.de/10005134704
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Why VAR Fails: Long Memory and Extreme Events in Financial Markets
Los, Cornelis A. - EconWPA - 2004
The Value-at-Risk (VAR) measure is based on only the second moment of a rates of return distribution. It is an insufficient risk performance measure, since it ignores both the higher moments of the pricing distributions, like skewness and kurtosis, and all the fractional moments resulting from...
Persistent link: https://www.econbiz.de/10005413041
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Do Brokers Misallocate Customer Trades? Evidence From Futures Markets
Park, Hun Y.; Sarkar, Asani; Wu, Lifan - EconWPA - 1998
In the context of futures markets, we study whether brokers allocate more favorable trades to their own accounts, and less favorable trades to their customers. We find that, within a thirty minute trading bracket, brokers on average buy at a lower price and sell at a higher price for their own...
Persistent link: https://www.econbiz.de/10005413100
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Persistence Characteristics of the Chinese Stock Markets
Los, Cornelis A.; Yu, Bing - EconWPA - 2005
This paper identifies such fundamental characteristics as the lack of ergodicity, stationarity, and independence, and it identifies the degree of initial persistence of the Chinese stock markets when they were more regulated. The index series are from the Shanghai (SHI) stock market and Shenzhen...
Persistent link: https://www.econbiz.de/10005561572
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Equilibrium Pricing in Incomplete Markets
Jouini, Elyès; Bizid, Abdelhamid - EconWPA - 2003
. Our approach leads to an interval of admissible prices much better than the arbitrage pricing interval. …
Persistent link: https://www.econbiz.de/10005413106
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Dynamic State Tameness
Londoño, Jaime - EconWPA - 2005
An extension of the idea of state tameness is presented in a dynamic framework. The proposed model for financial markets is rich enough to provide analytical tools that are mostly obtained in models that arise as the solution of SDEs with deterministic coefficients. In the presented model the...
Persistent link: https://www.econbiz.de/10005134649
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Another Look at Option Listing Effects
Mayhew, Stewart; Mihov, Vassil - EconWPA - 2000
Previous research has documented that the introduction of options seems to affect the volatility, liquidity, price and other characteristics of the underlying stock. Existing research, however, has not adequately accounted for the fact that option listing is endogenous, a result of decisions...
Persistent link: https://www.econbiz.de/10005134669
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Experience of Asian Asset Management Companies (AMCs): Do they Increase Moral Hazard? - Evidence from Thailand
Terada-Hagiwara, Akiko; Pasadilla, Gloria - EconWPA - 2004
This paper examines the performances of Asian asset management companies (AMCs). The analysis reveals that AMCs vary in their design and performance. Asset management companies can trigger moral hazard- inspired bank lending. Empirical examination of the Thai experience reveals that the moral...
Persistent link: https://www.econbiz.de/10005134678
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Galton's Error and the Under-Representation of Systematic Risk
LOS, CORNELIS A. - EconWPA - 2004
Our methodology of 'complete identification,' using simple algebraic geometry, throws new light on the continued commitment of Galton's Error in finance and the resulting misinformation of investors. Mutual funds conventionally advertise their relative systematic market risk, or 'betas,' to...
Persistent link: https://www.econbiz.de/10005134709