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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

Discrete-time option pricing with stochastic liquidity

Leippold, Markus; Schärer, Steven - 2016

Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity that may contribute to significant bid-ask spreads. Within the framework of conic finance, we develop a stochastic liquidity model, extending the discrete-time constant...

Persistent link: https://www.econbiz.de/10011515968

Linear credit risk models

Ackerer, Damien; Filipović, Damir - 2016

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

A term-structure model for dividends and interest rates

Filipović, Damir; Willems, Sander - 2017

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and...

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

Sentimental recovery

Pazarbasi, Altan; Schneider, Paul; Vilkov, Grigory - 2019 - This version: November 29, 2019

We investigate the market-compatible degree of agent heterogeneity by identifying and analyzing the full range of conditional beliefs consistent with observed asset prices and good-deal bounds. Our methodology neither makes assumptions on underlying processes nor does it use survey data. It can...

Persistent link: https://www.econbiz.de/10012134438

Volatility dependent structured products

Dyachenko, Artem; Farkas, Walter; Rieger, Marc Oliver - 2019

We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium …

Persistent link: https://www.econbiz.de/10012177147

Realizing smiles: pricing options with realized volatility

Corsi, Fulvio; Fusari, Nicola; Vecchia, Davide la - 2010

We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high …-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by … competing time-varying (i.e. GARCH-type) and stochastic volatility pricing models. The pricing improvement can be ascribed to …

Persistent link: https://www.econbiz.de/10003973052

Conditional density models for asset pricing

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

along with the specification of (a) the initial density, and (b) the volatility structure of the density. The volatility …

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

Collateral Smile

Leippold, Markus; Su, Lujing - 2011

prices, which translates into skew and smile patterns for implied volatility curves even under constant volatilities … the market. collateral requirements, funding costs, volatility smile, option pricing …

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

Inferring volatility dynamics and risk premia from the S&P 500 and VIX markets

Bardgett, Chris; Gourier, Elise; Leippold, Markus - 2013

of the parameters driving the risk-neutral conditional distributions and term structure of volatility, thereby enhancing …

Persistent link: https://www.econbiz.de/10010256394

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