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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/10012460613

Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market

Cho, Young-Hye - 1999

using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to … spreads in the underlying market, again supporting our theory. However, option market duration does affect option market …

Persistent link: https://www.econbiz.de/10012471453

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

Buser, Stephen A. - 1988

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/10012476537

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

Disasters implied by equity index options

Backus, David - 2009

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/10012463409

Rare Disasters and Exchange Rates

Farhi, Emmanuel - 2008

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/10012464842

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

Ofek, Eli - 2003

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/10012469280

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/10012460102

Asset Pricing with Heterogeneous Consumers and Limited Participation : Empirical Evidence

Brav, Alon - 1999

The Euler equations of consumption are tested on the household consumption of non-durables and services, reconstructed from the CEX database. The estimated relative risk aversion coefficient of the representative household decreases, and the estimated unexplained mean equity premium decreases,...

Persistent link: https://www.econbiz.de/10012471379

Asset Pricing with Heterogeneous Consumers and Limited Participation : Empirical Evidence

Brav, Alon - 2002

We present evidence that the equity premium and the premium of value stocks over growth stocks are explained in the 1982 1996 period with a stochastic discount factor (SDF) calculated as the weighted average of individual households' marginal rate of substitution with low and economically...

Persistent link: https://www.econbiz.de/10012469893

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