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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

Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set

Sala, Carlo; Barone-Adesi, Giovanni - 2015

theorems of asset pricing. While inferring the risk-neutral measure from options data provides a naturally forward- looking …

Persistent link: https://www.econbiz.de/10011506352

Fed funds futures variance futures

Filipović, Damir; Trolle, Anders B. - 2015

We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model-independent in a general setting that includes the cases...

Persistent link: https://www.econbiz.de/10011293604

Unspanned stochastic volatility in the multi-factor CIR model

Filipović, Damir; Larsson, Martin; Statti, Francesco - 2017

Empirical evidence suggests that fixed income markets exhibit unspanned stochastic volatility (USV), that is, that one cannot fully hedge volatility risk solely using a portfolio of bonds. While Collin-Dufresne and Goldstein (2002) showed that no two-factor Cox-Ingersoll-Ross (CIR) model can...

Persistent link: https://www.econbiz.de/10011761277

On the American swaption in the linear-rational framework

Filipović, Damir; Kitapbayev, Yerkin - 2016

We study American swaptions in the linear-rational (LR) term structure model introduced. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary problem that we tackle by the local time-space calculus. We...

Persistent link: https://www.econbiz.de/10011516038

Comments on: Nonparametric tail risk, stock returns and the macroeconomy

Camponovo, Lorenzo; Scaillet, Olivier; Trojani, Fabio - 2016

Persistent link: https://www.econbiz.de/10011518800

A term-structure model for dividends and interest rates

Filipović, Damir; Willems, Sander - 2017

options, and Euro Stoxx 50 index options …

Persistent link: https://www.econbiz.de/10011874740

Crash risk in individual stocks

Pederzoli, Paola - 2018

increase in the price of put options in individual stocks. Part of this skewness risk premium is idiosyncratic. Frictions on …This paper implements a novel model-free methodology to measure skewness risk premia in individual stocks. The … methodology takes the form of a trading strategy, a skewness swap. The return on the strategy shows a significant positive …

Persistent link: https://www.econbiz.de/10011899675

The term structure of equity and variance risk premia

Aït-Sahalia, Yacine; Karaman, Mustafa; Mancini, Loriano - 2018

We study the term structure of variance swaps, equity and variance risk premia. A model-free analysis reveals a significant price jump component in variance swap rates. A model-based analysis shows that investors' willingness to ensure against volatility risk increases after a market drop. This...

Persistent link: https://www.econbiz.de/10011899885

Linear-rational term structure models

Filipović, Damir; Larsson, Martin; Trolle, Anders B. - 2014

We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...

Persistent link: https://www.econbiz.de/10010338764