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Adding and subtracting Black-Scholes: A new approach to approximating derivative prices in continuous-time models

Kristensen, Dennis; Mele, Antonio - In: Journal of Financial Economics 102 (2011) 2, pp. 390-415

accurate approximations. We illustrate this method in a variety of contexts including option pricing with stochastic volatility …We develop a new approach to approximating asset prices in the context of continuous-time models. For any pricing model …

Persistent link: https://www.econbiz.de/10011039202

Investment shocks and the commodity basis spread

Yang, Fan - In: Journal of Financial Economics 110 (2013) 1, pp. 164-184

this correlation. The model reproduces the cross-sectional futures returns and many asset pricing tests. …

Persistent link: https://www.econbiz.de/10011039220

Time series momentum

Moskowitz, Tobias J.; Ooi, Yao Hua; Pedersen, Lasse Heje - In: Journal of Financial Economics 104 (2012) 2, pp. 228-250

to standard asset pricing factors and performs best during extreme markets. Examining the trading activities of …

Persistent link: https://www.econbiz.de/10011039243

Arbitrage crashes and the speed of capital

Mitchell, Mark; Pulvino, Todd - In: Journal of Financial Economics 104 (2012) 3, pp. 469-490

The imminent failure of prime brokers during the 2008 financial crisis caused a sudden decrease in the leverage afforded hedge funds. This decrease resulted from the asymmetrical payoff to rehypothecation lenders—the ultimate financiers, through prime brokers, to hedge funds. Seemingly...

Persistent link: https://www.econbiz.de/10011039252

Liquidity risk of corporate bond returns: conditional approach

Acharya, Viral V.; Amihud, Yakov; Bharath, Sreedhar T. - In: Journal of Financial Economics 110 (2013) 2, pp. 358-386

We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973–2007 in a regime-switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity...

Persistent link: https://www.econbiz.de/10011039286

Trading in derivatives when the underlying is scarce

Banerjee, Snehal; Graveline, Jeremy J. - In: Journal of Financial Economics 111 (2014) 3, pp. 589-608

Regulatory restrictions and market frictions can constrain the aggregate quantity of long and short positions in a security. When these constraints bind, we refer to the security as scarce, and its price becomes distorted relative to its value in a frictionless market. We show that an otherwise...

Persistent link: https://www.econbiz.de/10010743552

Does option trading convey stock price information?

Hu, Jianfeng - In: Journal of Financial Economics 111 (2014) 3, pp. 625-645

After executing option orders, options market makers turn to the stock market to hedge away the underlying stock … exposure. As a result, the stock exposure imbalance in option transactions translates into an imbalance in stock transactions …. This paper decomposes the total stock order imbalance into an imbalance induced by option transactions and an imbalance …

Persistent link: https://www.econbiz.de/10010743556

Pricing of commercial real estate securities during the 2007–2009 financial crisis

Driessen, Joost; Van Hemert, Otto - In: Journal of Financial Economics 105 (2012) 1, pp. 37-61

We study the relative and absolute pricing of CMBX contracts (commercial real estate derivatives) during the recent … financial crisis. Using a structural CMBX pricing model, we find little systematic mispricing relative to REIT equity and … options. We do find short-term deviations from this relative pricing relationship that are statistically and economically …

Persistent link: https://www.econbiz.de/10010576087

The impact of central clearing on counterparty risk, liquidity, and trading: Evidence from the credit default swap market

Loon, Yee Cheng; Zhong, Zhaodong Ken - In: Journal of Financial Economics 112 (2014) 1, pp. 91-115

This paper examines the impact of central clearing on the credit default swap (CDS) market using a sample of voluntarily cleared single-name contracts. Consistent with central clearing reducing counterparty risk, CDS spreads increase around the commencement of central clearing and are lower than...

Persistent link: https://www.econbiz.de/10010752915

Pinning in the S&P 500 futures

Golez, Benjamin; Jackwerth, Jens Carsten - In: Journal of Financial Economics 106 (2012) 3, pp. 566-585

We show that Standard & Poor's (S&P) 500 futures are pulled toward the at-the-money strike price on days when serial options on the S&P 500 futures expire (pinning) and are pushed away from the cost-of-carry adjusted at-the-money strike price right before the expiration of options on the S&P 500...

Persistent link: https://www.econbiz.de/10010587978