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Rationalization of Investment Preference Criteria

Pézier, Jacques - Henley Business School, University of Reading - 2011

The majority of risk adjusted performance measures (RAPM) currently in use – e.g., Treynor ratio, (?/?)) ratio, Omega index, RoVaR, ‘coherent’ preference criteria, etc. – are incompat- ible with any sensible utility function and would be best avoided. We argue instead for the assessment...

Persistent link: https://www.econbiz.de/10010938095

Optimal Hedging with Higher Moments

Brooks, Chris; Cerny, A.; Miffre, J. - Henley Business School, University of Reading - 2006

This study proposes a utility-based framework for the determination of optimal hedge ratios that can allow for the impact of higher moments on the hedging decision. The approach is applied to a set of 20 commodities that are hedged with futures contracts. We find that in sample, the performance...

Persistent link: https://www.econbiz.de/10005357664

Maximum Certain Equivalent Excess Returns and Equivalent Preference Criteria Part I - Theory

Pézier, Jacques - Henley Business School, University of Reading - 2007

Generalizations of traditional preference criteria such as the Sharpe ratio, the information ratio and the Jensen alpha are obtained by maximizing a certain equivalent excess return (CER) under relevant investment conditions. They are increasing functions of CERs and therefore equivalent...

Persistent link: https://www.econbiz.de/10008542356

Regime-Dependent Smile-Adjusted Delta Hedging

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

consistently and significantly improve on implied BSM delta hedging, for options of all moneyness and maturities and whether … 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 …

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