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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

Martingale representation theorem for the G-expectation

Soner, Halil Mete; Touzi, Nizar; Jianfeng Zhang - 2010

This paper considers the nonlinear theory of G-martingales as introduced by Peng in [16, 17]. A martingale representation theorem for this theory is proved by using the techniques and the results established in [20] for the second order stochastic target problems and the second order backward...

Persistent link: https://www.econbiz.de/10008798300

The endogenous price dynamics of the emission allowances : an application to CO 2 option pricing

Chesney, Marc; Taschinia, Luca - 2008

European-style options is derived …

Persistent link: https://www.econbiz.de/10003961380

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

Weak approximation of G-expectations

Dolinsky, Yan; Nutz, Marcel; Soner, Halil Mete - 2011

We introduce a notion of volatility uncertainty in discrete time and define the corresponding analogue of Pengs G-expectation. In the continuous-time limit, the resulting sublinear expectation converges weakly to the G-expectation. This can be seen as a Donsker-type result for the G-Brownian...

Persistent link: https://www.econbiz.de/10009009518

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

Detecting informed trading activities in the options markets

Chesney, Marc; Crameri, Remo; Mancini, Loriano - 2011

We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies … tends to cluster prior to certain events, takes place more in put than call options, generates easily large gains exceeding … millions, is not contemporaneously reflected in the underlying stock price, involves around the money options during calm times …

Persistent link: https://www.econbiz.de/10009314008

Detecting informed trading activities in the options markets : appendix on subprime financial crisis

Chesney, Marc; Crameri, Remo; Mancini, Loriano - 2011

and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009 … activities in put and call options. The realized gains amount to several hundreds of millions of dollars. Several cases are … discussed in detail. options trades, open interest, informed trading, false discovery rate …

Persistent link: https://www.econbiz.de/10009314012

Dynamics of interest rate swap and equity volatilities

Mele, Antonio; Obayashi, Yoshiki; Shalen, Catherine T. - 2013

While CBOE's VIX index is widely acknowledged as a broad-based investor “fear gauge” for its strong inverse relationship with major equity indexes, one cannot necessarily expect it to translate to the level of future turbulence or investor risk aversion in fixed-income markets. Indeed,...

Persistent link: https://www.econbiz.de/10009750617