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Option Prices in a Model with Stochastic Disaster Risk

Seo, Sang Byung - 2013

Contrary to the Black-Scholes model, volatilities implied by index option prices depend on the exercise price of the option and are often higher than realized volatilities. We explain both facts in the context of a model that can also explain the mean and volatility of equity returns. Our model...

Persistent link: https://www.econbiz.de/10012459050

The Asset Pricing Implications of Plausible Deniability

Back, Kerry E.; Carlin, Bruce Ian; Kazempour, Seyed Mohammad - National Bureau of Economic Research - 2021

We derive the effect of plausible deniability on asset risk premia in a dynamic setting with correlated firm values, systematic risk, and risk-averse investors. Firms optimally exercise American disclosure options, which are more valuable due to the possibility that other correlated firms may...

Persistent link: https://www.econbiz.de/10012482566

Nonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices

Ait-Sahalia, Yacine - 1995

theory for this estimator to gauge its accuracy. The SPD estimator provides an arbitrage-free method of pricing new, more …

Persistent link: https://www.econbiz.de/10012473518

Testing Option Pricing Models

Bates, David S. - 1995

extensive empirical literature on stock options, options on stock indexes and stock index futures, and options on currencies and … currency futures …

Persistent link: https://www.econbiz.de/10012473757

Perpetual Futures Pricing

Ackerer, Damien; Hugonnier, Julien; Jermann, Urban J. - National Bureau of Economic Research - 2024

Perpetual futures are contracts without expiration date in which the anchoring of the futures price to the spot price … various perpetual contracts, including linear, inverse, and quantos futures in both discrete and continuous-time. In … particular, we show that the futures price is given by the risk-neutral expectation of the spot sampled at a random time that …

Persistent link: https://www.econbiz.de/10015072878

Valuation of Variance Forecast with Simulated Option Markets

Engle, Robert F. - 1990

An appropriate metric for the success of an algorithm to forecast the variance of the rate of return on a capital asset could be the incremental profit from substituting it for the next best alternative. We propose a framework to assess incremental profits for competing algorithms to forecast...

Persistent link: https://www.econbiz.de/10012475683

Hedging Macroeconomic and Financial Uncertainty and Volatility

Dew-Becker, Ian - 2019

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/10012480268

A Demand System Approach to Asset Pricing

Koijen, Ralph S. J. - 2015

We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio-choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings...

Persistent link: https://www.econbiz.de/10012456921

How Can a Q-Theoretic Model Price Momentum?

Novy-Marx, Robert - 2015

prior year's performance, but for reasons outside of q-theory---it does so by including a fundamental momentum factor, i …

Persistent link: https://www.econbiz.de/10012457681

Portfolio Choice with Illiquid Assets

Ang, Andrew - 2013

We present a model of optimal allocation over liquid and illiquid assets, where illiquidity is the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity leads to increased and state-dependent risk aversion, and reduces the allocation to both liquid and...

Persistent link: https://www.econbiz.de/10012459224