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Farhi, Emmanuel - 2010

We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines …

Persistent link: https://www.econbiz.de/10012759530

Parametric Inference and Dynamic State Recovery from Option Panels

Andersen, Torben G. - 2012

We develop a new parametric estimation procedure for option panels observed with error which relies on asymptotic approximations assuming an ever increasing set of observed option prices in the moneyness- maturity (cross-sectional) dimension, but with a fixed time span. We develop consistent...

Persistent link: https://www.econbiz.de/10013107009

Demand for Crash Insurance, Intermediary Constraints, and Risk Premia in Financial Markets

Chen, Hui - 2019

We propose a new measure of financial intermediary constraints based on how the intermediaries manage their tail risk exposures. Using data for the trading activities in the market of deep out-of-the-money S&P 500 put options, we identify periods when the variations in the net amount of trading...

Persistent link: https://www.econbiz.de/10012891794

Limited Arbitrage and Short Sales Restrictions : Evidence from the Options Markets

Ofek, Eli - 2009

behavioral finance theory that relies on over-optimistic investors in the stock market and segmentation between the stock and …

Persistent link: https://www.econbiz.de/10012767791

On the Determinants of the Value of Call Options on Default-Free Bonds

Buser, Stephen A. - 2008

Models of interest-dependent claims that imply similar term structures and levels of interest rate volatility also produce similar estimates of bond option values. This result is established for simple option forms with known closed-form solutions as well as for more complex options that require...

Persistent link: https://www.econbiz.de/10012774565

Disasters Implied by Equity Index Options

Backus, David K. - 2010

We use prices of equity index options to quantify the impact of extreme events on asset returns. We define extreme events as departures from normality of the log of the pricing kernel and summarize their impact with high-order cumulants: skewness, kurtosis, and so on. We show that high-order...

Persistent link: https://www.econbiz.de/10013151374

Hedging Macroeconomic and Financial Uncertainty and Volatility

Dew-Becker, Ian; Giglio, Stefano; Kelly, Bryan T. - 2021

We study the pricing of uncertainty shocks using a wide-ranging set of options that reveal premia for macroeconomic risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while those exposed to the realization of large shocks have earned...

Persistent link: https://www.econbiz.de/10013224964

Embedded Leverage

Frazzini, Andrea - 2012

Many financial instruments are designed with embedded leverage such as options and leveraged exchange traded funds (ETFs). Embedded leverage alleviates investors' leverage constraints and, therefore, we hypothesize that embedded leverage lowers required returns. Consistent with this hypothesis,...

Persistent link: https://www.econbiz.de/10013097662

The Term Structure of the Forward Premium

Hakkio, Craig S. - 2013

. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …

Persistent link: https://www.econbiz.de/10012754712

Risk Based Explanations of the Equity Premium

Donaldson, John B. - 2010

This essay reviews the family of models that seek to provide aggregate risk based explanations for the empirically observed equity premium. Theories based on non-expected utility preference structures, limited financial market participation, model uncertainty and the small probability of...

Persistent link: https://www.econbiz.de/10012759947

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