Similar Search Results

Predicting Agency Rating Migrations with Spread Implied Ratings

Kou, Jianming; Varotto, Dr Simone - Henley Business School, University of Reading - 2005

Investors traditionally rely on credit ratings to price debt instruments. However, rating agencies are known to be prudent in their approach to rating revisions, which results in delayed ratings adjustments to mutating credit conditions. For a large set of eurobonds we derive credit spread...

Persistent link: https://www.econbiz.de/10005178168

Regime-Dependent Smile-Adjusted Delta Hedging

Alexander, Carol; Rubinov, Alexander; Kalepky, Markus; … - Henley Business School, University of Reading - 2010

volatility models with Black-Scholes-Merton (BSM) deltas, and in particular with the `implied BSM’ model in which an option’s … delta is based on its own market implied volatility. Various empirical studies of vanilla options on different equity … depend on the market regime. Using 16.5-years of daily closing prices for FTSE 100 vanilla options, out-of-sample tests of …

Persistent link: https://www.econbiz.de/10011206320

Liquidity Risk Premia in the International Shipping Derivatives Market

Alizadeh, Amir; Kappou, Konstantina; Tsouknidis, Dimitris; … - Henley Business School, University of Reading - 2014

The study examines the existence of liquidity risk premia on freight derivatives returns. The Amihud liquidity ratio and bid-ask spreads are utilized to assess the existence of liquidity premia. Other macroeconomic variables are used to control for market risk. Results indicate that liquidity...

Persistent link: https://www.econbiz.de/10011210427

Did Long-Short Investors Destabilize Commodity Markets?

Miffre, Joëlle; Brooks, Chris - Henley Business School, University of Reading - 2013

This paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long-short commodity portfolios and their conditional correlation with traditional assets (stocks and bonds). Using several groups of trading...

Persistent link: https://www.econbiz.de/10010800984

VIX Dynamics with Stochastic Volatility of Volatility

Kaeck, Andreas; Alexander, Carol - Henley Business School, University of Reading - 2010

This paper examines the ability of several different continuous-time one and two-factor jump-diffusion models to capture the dynamics of the VIX volatility index for the period between 1990 and 2010. For the one-factor models we study affine and non-affine specifications, possibly augmented with...

Persistent link: https://www.econbiz.de/10010838038

Seasonality and the Valuation of Commodity Options

Back, Janis; Prokopczuk, Marcel; Rudolf, Markus - Henley Business School, University of Reading - 2010

seasonal volatility on models’ option pricing performance. In terms of options pricing, a deterministic seasonal component at … commodity price. Analyzing an extensive sample of soybean and heating oil options, we find that seasonality in volatility is an …

Persistent link: https://www.econbiz.de/10010838042

Seasonal Stochastic Volatility: Implications for the Pricing of Commodity Options

Back, Janis; Prokopczuk, Marcel; Rudolf, Markus - Henley Business School, University of Reading - 2011

seasonal behavior for the pricing of commodity options is analyzed. We propose a stochastic volatility model where the drift …-closed-form pricing formulas for the valuation of options on commodity futures. In the main part of the paper, we empirically study the … impact of the proposed seasonal stochastic volatility model on the pricing accuracy of natural gas futures options traded at …

Persistent link: https://www.econbiz.de/10010838043

Average Portfolio Insurance Strategies

Pézier, Jacques; Scheller, Johanna - Henley Business School, University of Reading - 2012

We design average portfolio insurance (API) strategies with an investment floor and a buffer that is a power of a geometric average of the underlying asset price. We prove that API strategies are optimal for investors with hyperbolic absolute risk aversion who become progressively more risk...

Persistent link: https://www.econbiz.de/10010838044

A General Approach to Real Option Valuation with Applications to Real Estate Investments

Alexander, Carol; Chen, Xi - Henley Business School, University of Reading - 2012

We model investment opportunities with a single source of uncertainty, i.e. the market price of the investment. Investment cost can be predetermined or perfectly correlated with the market price. The common paradigm for risk-neutral real-option pricing is a special case en- compassed within our...

Persistent link: https://www.econbiz.de/10010838047

Does Information Content of Option Prices Add Value for Asset Allocation?

Zdorovenin, Vladimir; Pézier, Jacques - Henley Business School, University of Reading - 2011

The aim of this paper is to determine whether forward-looking option- implied returns forecasts lead to better out-of-sample portfolio performance than conventional time series models. We consider a simple two-asset setting with a risk-free asset and the S&P 500 index the risky asset with...

Persistent link: https://www.econbiz.de/10010838054