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We introduce an evolutionary equilibrium asset pricing model with heterogeneous agents who can either act as brokers or … hedge funds. Hedge funds can trade on margin, taking short or (leveraged) long positions in the assets. Brokers provide …
Persistent link: https://www.econbiz.de/10011762225
We propose an approach to the valuation of payoffs in general semimartingale models of financial markets where prices are nonnegative. Each asset price can hit 0; we only exclude that this ever happens simultaneously for all assets. We start from two simple, economically motivated axioms, namely...
Persistent link: https://www.econbiz.de/10011514353
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS option can be uniformly approximated by...
Persistent link: https://www.econbiz.de/10011516035
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 … is computed by sampling the FFF rate discretely. The valuation of longer-term FFF variance futures is subject to an …
Persistent link: https://www.econbiz.de/10011293604
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest many standard models as special cases. The loss...
Persistent link: https://www.econbiz.de/10011619282
interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an … specification has a good fit with Euribor interest rate swaps and swaptions, Euro Stoxx 50 index dividend futures and dividend …
Persistent link: https://www.econbiz.de/10011874740
We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product's Sharpe ratio is higher than the SPY Sharpe ratio. If we invest $10000 into the product, the products' payoff is around...
Persistent link: https://www.econbiz.de/10012177147
On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen's stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the...
Persistent link: https://www.econbiz.de/10011875647
were the result of coordinated trading by retail investors, who discussed their trading strategies on social media …
Persistent link: https://www.econbiz.de/10012502167
The interplay between investors' demand and providers' incentives has shaped the evolution of exchange-traded funds (ETFs). While early ETFs offered diversification at low cost, later ETFs track niche portfolios and charge high fees. Strikingly, over their first five years, specialized ETFs lose...
Persistent link: https://www.econbiz.de/10012421474