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Geometric step options with jumps : parity relations, PIDEs, and semi-analytical pricing

Farkas, Walter; Mathys, Ludovic - 2020

The present article studies geometric step options in exponential Lévy markets. Our contribution is manifold and extends several aspects of the geometric step option pricing literature. First, we provide symmetry and parity relations and derive various characterizations for both European-type...

Persistent link: https://www.econbiz.de/10012181323

A two-factor cointegrated commodity price model with an application to spread option pricing

Farkas, Walter; Gourier, Elise; Huitema, Robert; … - 2016 - This version: May 20, 2016

In this paper, we propose an easy-to-use yet comprehensive model for a system of cointegrated commodity prices. While retaining the exponential affine structure of previous approaches, our model allows for an arbitrary number of cointegration relationships. We show that the cointegration...

Persistent link: https://www.econbiz.de/10011507774

Beyond cash-additive risk measures : when changing the numéraire fails

Farkas, Walter; Koch Medina, Pablo; Munari, Cosimo - 2013

We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a...

Persistent link: https://www.econbiz.de/10010258580

Capital requirements with defaultable securities

Farkas, Walter; Koch Medina, Pablo; Munari, Cosimo-Andrea - 2013

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

Persistent link: https://www.econbiz.de/10010258584

Intrinsic risk measures

Farkas, Walter; Smirnow, Alexander - 2016 - First version: October 26, 2016

Monetary risk measures classify a financial position by the minimal amount of external capital that must be added to the position to make it acceptable.We propose a new concept: intrinsic risk measures. The definition via external capital is avoided and only internal resources appear. An...

Persistent link: https://www.econbiz.de/10011620033

Herding and stochastic volatility

Farkas, Walter; Necula, Ciprian; Waelchli, Boris - 2015 - This version: 30 September 2015

In this paper we develop a one-factor non-affine stochastic volatility option pricing model where the dynamics of the underlying is endogenously determined from micro-foundations. The interaction and herding of the agents trading the underlying asset induce an amplification of the volatility of...

Persistent link: https://www.econbiz.de/10011507732

Optimal risk-sharing across a network of insurance companies

Ettlin, Nicolas; Farkas, Walter; Kull, Andreas; … - 2020

Risk transfer is a key risk and capital management tool for insurance companies. Transferring risk between insurers is used to mitigate risk and manage capital re- quirements. We investigate risk transfer in the context of a network environment of insurers and consider capital costs and capital...

Persistent link: https://www.econbiz.de/10012270812

Intra-horizon expected shortfall and risk structure in models with jumps

Farkas, Walter; Mathys, Ludovic; Vasiljević, Nikola - 2019

The present article deals with intra-horizon risk in models with jumps. Our general understanding of intra-horizon risk is along the lines of the approach taken in [BRSW04], [Ro08], [BMK09], [BP10], and [LV19]. In particular, we believe that quantifying market risk by strictly relying on...

Persistent link: https://www.econbiz.de/10012179511

Market efficiency reloaded: why insider trades do not reveal exploitable information

Dickgiesser, Sebastian; Kaserer, Christoph - 2008

by a subset of stocks with high arbitrage risk as measured by their idiosyncratic volatility. This restrains arbitrageurs … from engaging in otherwise profitable and price-correcting trades. As arbitrage risk is positively related to a stock's bid … mainly be explained by the cost associated with risky arbitrage. Our findings provide evidence that the German stock market …

Persistent link: https://www.econbiz.de/10010305695

Market liquidity risk: an overview

Stange, Sebastian; Kaserer, Christoph - 2009

Market liquidity is the ease of trading an asset. Its risk is the potential loss, because a security can only be traded at high or prohibitive costs. While the omnipresence and importance of market liquidity is widely acknowledged, it has long remained a more or less elusive concept. Treatment...

Persistent link: https://www.econbiz.de/10010305705