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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
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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
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Risk Preferences Implied by Synthetic Options
Dew-Becker, Ian; Giglio, Stefano - National Bureau of Economic Research - 2023
The historical returns on equity index options are well known to be strikingly negative. That is typically explained either by investors having convex marginal utility over stock returns (e.g. crash/variance aversion) or by intermediaries demanding a premium for hedging risk. This paper examines...
Persistent link: https://www.econbiz.de/10014436964
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Recent Developments in Financial Risk and the Real Economy
Dew-Becker, Ian; Giglio, Stefano - National Bureau of Economic Research - 2023
This paper reviews recent developments in macro and finance on the relationship between financial risk and the real economy. We focus on three specific topics: the term structure of uncertainty, time variation - and specifically the long-term decline - in the variance risk premium, and time...
Persistent link: https://www.econbiz.de/10014437009
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War Discourse and Disaster Premia : 160 Years of Evidence from Stock and Bond Markets
Hirshleifer, David; Mai, Dat; Pukthuanthong, Kuntara - National Bureau of Economic Research - 2023
Using a semi-supervised topic model on 7,000,000 New York Times articles spanning 160 years, we test whether topics of media discourse predict future stock and bond market returns to test rational and behavioral hypotheses about market valuation of disaster risk. Focusing on media discourse...
Persistent link: https://www.econbiz.de/10014287305
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Option-Implied Spreads and Option Risk Premia
Culp, Christopher L.; Gandhi, Mihir; Nozawa, Yoshio; … - National Bureau of Economic Research - 2021
We propose implied spreads (IS) and normalized implied spreads (NIS) as simple measures to characterize option prices. IS is the credit spread of an option's implied bond, the portfolio long a risk-free bond and short a put option. NIS normalizes IS by the risk-neutral default probability and...
Persistent link: https://www.econbiz.de/10012585425
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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/10012479526
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Equity Term Structures without Dividend Strips Data
Giglio, Stefano; Kelly, Bryan T.; Kozak, Serhiy - National Bureau of Economic Research - 2023
We use a large cross-section of equity returns to estimate a rich affine model of equity prices, dividends, returns and their dynamics. Using the model, we price dividend strips of the aggregate market index, as well as any other well-diversified equity portfolio. We do not use any dividend...
Persistent link: https://www.econbiz.de/10014250137
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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
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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