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The price of the smile and variance risk premia

Gruber, Peter H.; Tebaldi, Claudio; Trojani, Fabio - 2015 - This version: September 8, 2015

traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …

Persistent link: https://www.econbiz.de/10011412294

Portfolio selection with options and transaction costs

Malamud, Semyon - 2014

highly attractive skewness-kurtosis profi le. In the presence of transactions costs that depend on an option's moneyness and … sensitivities to chosen risk factors. I test these portfolios empirically and find that options signifi cantly improve the risk …

Persistent link: https://www.econbiz.de/10010337963

The pricing of subprime mortgage risk in good times and bad : evidence from the ABX.HE indices

Fender, Ingo; Scheicher, Martin - 2009

This paper investigates the market pricing of subprime mortgage risk on the basis of data for the ABX.HE family of indices, which have become a key barometer of mortgage market conditions during the recent financial crisis. After an introduction into ABX index mechanics and a discussion of...

Persistent link: https://www.econbiz.de/10003866554

The term structure of risk premia : new evidence from the financial crisis

Berg, Tobias - 2010

This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk...

Persistent link: https://www.econbiz.de/10003971282

Investors with too many options?

Dorn, Daniel - 2010

During the last decade, markets for covered warrants (bank-issued options) have flourished in Europe and Asia. In these … trades in call options on the German DAX index, this paper documents substantial price dispersion across securities that are … close substitutes. Moreover, investors generally fail to identify attractively priced options. The results suggest that the …

Persistent link: https://www.econbiz.de/10003973343

Conditional density models for asset pricing

Filipović, Damir; Hughston, Lane P.; Macrina, Andrea - 2010

the options market and the class of valuation problem being undertaken. Various examples are studied in detail, with exact …

Persistent link: https://www.econbiz.de/10008797695

Ambiguity aversion and the term structure of interest rates

Gagliardini, Patrick; Porchia, Paolo; Trojani, Fabio - 2008

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

Persistent link: https://www.econbiz.de/10003961717

Collateral Smile

Leippold, Markus; Su, Lujing - 2011

We analyze the impact of funding costs and margin requirements on prices of index options traded on the CBOE. We …

Persistent link: https://www.econbiz.de/10009375107

Time-changed Lévy LIBOR market model for the joint estimation and pricing of caps and swaptions

Leippold, Markus; Stromberg, Jacob - 2012 - This version: May 18, 2012

We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes are split into three components. The first component allows us to match the volatility term structure, the second generates stochastic volatility, and the third one...

Persistent link: https://www.econbiz.de/10009558358

Managing the risks of corporate bond portfolios : new evidence in the light of the sub‐prime crisis

Barone-Adesi, Giovanni; Carcano, Nicola; Dall'O, Hakim - 2012

We consider modeling errors in the hedging of a portfolio composed from BBB-rated bonds. By doing this, we open a new perspective to the debate on the relationship between corporate bonds and CDS spreads. We find that in ordinary times the added value of indexlinked credit derivatives is very...

Persistent link: https://www.econbiz.de/10009558422