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Hedging long-dated oil futures and options using short-dated securities : revisiting Metallgesellschaft

Doran, James S.; Ronn, Ehud I. - In: Journal of risk and financial management : JRFM 14 (2021) 8, pp. 1-10

Since the collapse of the Metallgesellschaft AG due to hedging losses in 1993, energy practitioners have been concerned with the ability to hedge long-dated linear and non-linear oil liabilities with short-dated futures and options. This paper identifies a model-free non-parametric approach to...

Persistent link: https://www.econbiz.de/10012626875

An artificial intelligence approach to the valuation of American-style derivatives : a use of particle swarm optimization

Chen, Ren-Raw; Huang, Jeffrey; Huang, William; Yu, Robert - In: Journal of risk and financial management : JRFM 14 (2021) 2/57, pp. 1-22

. Specifically, we use swarm intelligence to find the optimal exercise boundary for an American-style derivative. Swarm intelligence …

Persistent link: https://www.econbiz.de/10012483653

Bond risk premia and restrictions on risk prices

Hevia, Constantino; Sola, Martin - In: Journal of risk and financial management : JRFM 11 (2018) 4, pp. 1-22

Researchers who estimate affine term structure models often impose overidentifying restrictions (restrictions on parameters beyond those necessary for identification) for a variety of reasons. While some of those restrictions seem to have minor effects on the extracted factors and some measures...

Persistent link: https://www.econbiz.de/10011961381

The effect of industry restructuring on peer firms

Holcomb, Alex; Mason, Paul - In: Journal of risk and financial management : JRFM 14 (2021) 5, pp. 1-25

We study the bond price reaction of a merged firms peers, in order to better understand how the market responds to a … equity holders expect a direct benefit from a potential acquisition - in the form of a price premium-peer firm bond holders … reduction in risk as the explicit return driver, we show that abnormal bond returns within firm (between different bond issues …

Persistent link: https://www.econbiz.de/10012534527

Multiperiod hedging using futures : mean reversion and the optimal hedging path

Rao, Vadhindran K. - In: Journal of risk and financial management : JRFM 4 (2012) 1, pp. 133-161

This paper considers the multiperiod hedging decision in a framework of mean-reverting spot prices and unbiased futures markets. The task is to determine the optimal hedging path, i.e., the sequence of positions in futures contracts with the objective of minimizing the variance of an uncertain...

Persistent link: https://www.econbiz.de/10011555950

Pricing perpetual American put options with asset-dependent discounting

Al-Hadad, Jonas; Palmowski, Zbigniew - In: Journal of risk and financial management : JRFM 14 (2021) 3, pp. 1-19

The main objective of this paper is to present an algorithm of pricing perpetual American put options with asset-dependent discounting. The value function of such an instrument can be described as VωAPut(s)=supτ∈TEs[e−∫0τω(Sw)dw(K−Sτ)+], where T is a family of stopping times, ω is...

Persistent link: https://www.econbiz.de/10012520043

Causality between arbitrage and liquidity in platinum futures

Iwatsubo, Kentaro; Watkins, Clinton - In: Journal of risk and financial management : JRFM 15 (2022) 12, pp. 1-17

Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the deviation. A demand shock leads to greater liquidity,...

Persistent link: https://www.econbiz.de/10014284282

Pricing a collateralized derivative trade with a funding value adjustment

Hunzinger, Chadd B.; Labuschagne, Coenraad C. A. - In: Journal of risk and financial management : JRFM 8 (2015) 1, pp. 17-42

The 2008 credit crisis changed the manner in which derivative trades are conducted. One of these changes is the posting … adjustment to derivative prices, known as a funding value adjustment (FVA), which is interlinked with the posting of collateral … price of a collateralized derivative. The fact that the two models coincide is also verified by numerical implementation of …

Persistent link: https://www.econbiz.de/10011552865

Risk management of interest rate derivative portfolios : a stochastic control approach

Kiriakopoulos, Konstantinos; Koulis, Alexandros - In: Journal of risk and financial management : JRFM 7 (2014) 4, pp. 130-149

In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...

Persistent link: https://www.econbiz.de/10011552973

Central counterparties and liquidity provision in cash markets

Richter, Thomas - In: Journal of risk and financial management : JRFM 14 (2021) 12, pp. 1-26

-by-trade data from sovereign bond markets, we show that liquidity provision by CCP members decreased to a lesser extent following …

Persistent link: https://www.econbiz.de/10012798918

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