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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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Arbitrage-Free Limit Order Books and the Pricing of Order Flow Risk
Lehmann, Bruce N. - 2008
This paper builds on the landmark contribution of Glosten (1994) by treating the determination of limit order supply schedules as an exercise in asset pricing theory with the possible sizes of incoming market orders as the value-relevant states of nature, yielding an analogue of the Fundamental...
Persistent link: https://www.econbiz.de/10012772385
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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
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Too-Systemic-To-Fail : What Option Markets Imply About Sector-Wide Government Guarantees
Kelly, Bryan T. - 2011
Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector...
Persistent link: https://www.econbiz.de/10013123683
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Options-Pricing Formula with Disaster Risk
Barro, Robert J. - 2016
A new options-pricing formula applies to far-out-of-the money put options on the overall stock market when disaster risk is the dominant force, the size distribution of disasters follows a power law, and the economy has a representative agent with Epstein-Zin utility. In the applicable region,...
Persistent link: https://www.econbiz.de/10013001208
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Advance Refundings of Municipal Bonds
Ang, Andrew - 2013
Municipal bonds are often "advance refunded." Bonds that are not yet callable are defeased by creating a trust that pays the interest up to the call date, and pays the call price. New debt, generally at lower interest rates, is issued to fund the trust. Issuing new securities generally has zero...
Persistent link: https://www.econbiz.de/10013075855