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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
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Investment, Consumption, and Hedging under Incomplete Markets
Miao, Jianjun - 2007
Entrepreneurs often face undiversifiable idiosyncratic risks from their business investments. We extend the standard real options approach to an incomplete markets environment and analyze the joint decisions of business investments, consumption/savings, and portfolio selection. For a lump-sum...
Persistent link: https://www.econbiz.de/10012465402
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Demand-Based Option Pricing
Garleanu, Nicolae - 2005
We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...
Persistent link: https://www.econbiz.de/10012466828
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Option Hedging Using Empirical Pricing Kernels
Rosenberg, Joshua V. - 1997
This paper develops a method for option hedging which is consistent with time-varying preferences and probabilities … the spread between implied and objective volatilities. Hedging results reveal that typical hedging techniques for out …-of-the-money S&P500 index options, such as Black-Scholes or historical minimum variance hedging, are inferior to the EPK hedging …
Persistent link: https://www.econbiz.de/10012472589
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GARCH Gamma
Engle, Robert F. - 1995
This paper addresses the issue of hedging option positions when the underlying asset exhibits stochastic volatility. By … parameterizing the volatility process as GARCH, and utilizing risk- neutral valuation, we estimate hedging parameters (delta and … gamma) using Monte-Carlo simulation. We estimate hedging parameters for options on the Standard and Poor's 500 index, a bond …
Persistent link: https://www.econbiz.de/10012473758
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Hedging Options in a GARCH Environment : Testing the Term Structure of Stochastic Volatility Models
Engle, Robert F. - 1994
This paper develops a methodology for testing the term structure of volatility forecasts derived from stochastic volatility models, and implements it to analyze models of S&P 500 index volatility. Volatility models are compared by their ability to hedge options positions sensitive to the term...
Persistent link: https://www.econbiz.de/10012473941
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A Nonparametric Approach to Pricing and Hedging Derivative Securities Via Learning Networks
Hutchinson, James M. - 1994
the practical relevance of our network pricing approach, we apply it to the pricing and delta-hedging of S&P 500 futures …
Persistent link: https://www.econbiz.de/10012474210
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Evidence of Decreasing Internet Entropy : The Lack of Redundancy in DNS Resolution by Major Websites and Services
Bates, Samantha - 2018
This paper analyzes the extent to which the Internet's global domain name resolution (DNS) system has preserved its distributed resilience given the rise of cloud-based hosting and infrastructure. We explore trends in the concentration of the DNS space since at least 2011. In addition, we...
Persistent link: https://www.econbiz.de/10012453397
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Rationally Inattentive Behavior : Characterizing and Generalizing Shannon Entropy
Caplin, Andrew - 2017
We provide a full behavioral characterization of the standard Shannon model of rational inattention. The key axiom is "Invariance under Compression", which identifies this model as capturing an ideal form of attention-constrained choice. We introduce tractable generalizations that allow for many...
Persistent link: https://www.econbiz.de/10012455030
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Term Structures of Asset Prices and Returns
Backus, David - 2016
We explore the term structures of claims to a variety of cash flows, namely, U.S. government bonds (claims to dollars), foreign government bonds (claims to foreign currency), inflation-adjusted bonds (claims to the price index), and equity (claims to future equity indexes or dividends). The...
Persistent link: https://www.econbiz.de/10012456513