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Kraft, Holger - 2013

This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. The significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By decomposing...

Persistent link: https://www.econbiz.de/10012459825

Transform Analysis and Asset Pricing for Affine Jump-Diffusions

Duffie, Darrell - 1999

-based models of default, as well as a wide range of option-pricing applications. An illustrative example examines the implications … of stochastic volatility and jumps for option valuation. This example highlights the impact on option 'smirks' of the …

Persistent link: https://www.econbiz.de/10012471694

Pricing and Hedging Derivative Securities in Incomplete Markets : An E-Aritrage Model

Bertsimas, Dimitris - 1997

Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic portfolio strategy involving only the underlying securities...

Persistent link: https://www.econbiz.de/10012472561

Post-'87 Crash Fears in S&P 500 Futures Options

Bates, David S. - 1997

option pricing methodology, and fitted to S&P 500 futures options data over 1988-1993 using a nonlinear generalized least … volatility) that are implausible given the time series properties of option prices. By contrast, the stochastic volatility …

Persistent link: https://www.econbiz.de/10012472934

Implied Volatility Functions : Empirical Tests

Dumas, Bernard - 1996

Black and Scholes (1973) implied volatilities tend to be systematically related to the option's exercise price and time … function (DVF) option valuation model, which has the potential of fitting the observed cross-section of option prices exactly … significance of the implied deterministic volatility function by examining the predictive and hedging performance of the DV option …

Persistent link: https://www.econbiz.de/10012473359

Jumps and Stochastic Volatility : Exchange Rate Processes Implicit in thePHLX Deutschemark Options

Bates, David S. - 1993

/jump-diffusion processes when jump risk and volatility risk are systematic and nondiversifiable, thereby nesting two major option pricing …

Persistent link: https://www.econbiz.de/10012474344

Index-Option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts

Engle, Robert F. - 1993

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/10012474423

Construction and Interpretation of Model-Free Implied Volatility

Andersen, Torben G. - 2007

The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...

Persistent link: https://www.econbiz.de/10012465200

Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives

Trolle, Anders B. - 2006

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 the crude-oil market. We then develop a tractable...

Persistent link: https://www.econbiz.de/10012465916

Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S&P 500 Options

Santa-Clara, Pedro - 2004

. We find that the average premium that compensates the investor for the risks implicit in option prices, 10.1 percent, is …

Persistent link: https://www.econbiz.de/10012467775