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Currency Option Pricing in Credible Target Zones
Dumas, Bernard - 2010
This paper develops a model for valuing options on a currency which is maintained within a band. The starting point of our model is the well known Krugman model for exchange-rate behavior within a target zone. Results from model runs provide insight into evidence reported by other authors of...
Persistent link: https://www.econbiz.de/10012763090
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Option Prices in a Model with Stochastic Disaster Risk
Seo, Sang Byung - 2013
the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … turns out to be crucial to the model's ability to explain both equity volatility and option prices. We explore different …
Persistent link: https://www.econbiz.de/10013073202
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Transform Analysis and Asset Pricing for Affine Jump-Diffusions
Duffie, Darrell - 2008
examines the implications of stochastic volatility and jumps for option valuation. This example highlights the impact on option … amp;apos;smirksamp;apos; of the joint distribution of jumps in volatility and jumps in the underlying asset price, through …
Persistent link: https://www.econbiz.de/10012774824
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Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives
Trolle, Anders B. - 2007
We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude …-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in … stochastic volatility. The model features correlations between innovations to futures prices and volatility, quasi …
Persistent link: https://www.econbiz.de/10012778140
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Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S&P 500 Options
Santa-Clara, Pedro - 2005
We use a novel pricing model to filter times series of diffusive volatility and jump intensity from Samp;P 500 index … about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex …
Persistent link: https://www.econbiz.de/10012785090
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Index-Option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts
Engle, Robert F. - 2010
In pricing primary-market options and in making secondary markets, financial intermediaries depend on the quality of forecasts of the variance of the underlying assets. Hence, the gain from improved pricing of options would be a measure of the value of a forecast of underlying asset returns....
Persistent link: https://www.econbiz.de/10012763182
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Carry Trade and Systemic Risk : Why are FX Options so Cheap?
Caballero, Ricardo J. - 2013
In this paper we document first that, in contrast with their widely perceived excess returns, popular carry trade strategies yield low systemic-risk-adjusted returns. In particular, we show that carry trade returns are highly correlated with the return of a VIX rolldown strategy --i.e., the...
Persistent link: https://www.econbiz.de/10013089284
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The Forecasting Ability of Correlations Implied in Foreign Exchange Options
Campa, José Manuel - 2008
This paper evaluates the forecasting accuracy of correlation derived from implied volatilities in dollar-mark, dollar-yen, and mark-yen options from January 1989 to May 1995. As a forecast of realized correlation between the dollar-mark and dollar-yen, implied correlation is compared against...
Persistent link: https://www.econbiz.de/10012774954
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An Options-Based Analysis of Emerging Market Exchange Rate Expectations : Brazil'S Real Plan, 1994-1997
Campa, José Manuel; Chang, P. H. Kevin; Refalo, James F. - 2021
This paper uses currency option data from the BMF, the Commodities and Futures exchange in Sao Paulo, Brazil, to investigate market expectations on the Brazilian Real-U.S. dollar exchange rate from October 1994 through July 1997. Using options data, we derive implied probability density...
Persistent link: https://www.econbiz.de/10013224319
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Estimating the Impact of Restructuring on Electricity Generation Efficiency : The Case of the Indian Thermal Power Sector
Cropper, Maureen - 2011
We examine the impact of electricity sector restructuring on the operating efficiency of coal-fired power plants in India. Between 1995 and 2009, 85 percent of coal-based generation capacity owned by state governments was unbundled from vertically integrated State Electricity Boards into state...
Persistent link: https://www.econbiz.de/10013120321