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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 a simple but effective (pseudo) long memory...
Persistent link: https://www.econbiz.de/10003973052
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Analytical option pricing under an asymmetrically displaced double gamma jump-diffusion model
Thul, Matthias; Zhang, Ally Quan - 2014 - Last Update: May 1, 2014
We generalize the Kou (2002) double exponential jump-diffusion model in two directions. First, we independently displace the two tails of the jump size distribution away from the origin. Second, we allow for each of the displaced tails to follow a gamma distribution with an integer-valued shape...
Persistent link: https://www.econbiz.de/10011875854
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Is the price kernel monotone?
Barone-Adesi, Giovanni; Dall'O, Hakim - 2010
We provide a new method to derive the state price density per unit probability based on option prices and GARCH model. We derive the risk neutral distribution using the result in Breeden and Litzenberger (1978) and the historical density adapting the GARCH model of Barone-Adesi, Engle, and...
Persistent link: https://www.econbiz.de/10003973040
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The impact of news on higher moments
Jondeau, Eric (contributor); Rockinger, Michael (contributor) - 2006
In this paper, we extend the concept of News Impact Curve developed by Engle and Ng (1993) to the higher moments of the multivariate returns' distribution, thereby providing a tool to investigate the impact of shocks on the characteristics of the subsequent distribution. For this purpose, we...
Persistent link: https://www.econbiz.de/10003394353
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Comments on: Nonparametric tail risk, stock returns and the macroeconomy
Camponovo, Lorenzo; Scaillet, Olivier; Trojani, Fabio - 2016
Persistent link: https://www.econbiz.de/10011518800
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Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set
Sala, Carlo; Barone-Adesi, Giovanni - 2015
information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental …
Persistent link: https://www.econbiz.de/10011506352
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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
In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...
Persistent link: https://www.econbiz.de/10011412294
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Taking ambiguity to reality : robust agents cannot trust the data too much
Trojani, Fabio; Wiehenkamp, Christian; Wrampelmeyer, Jan - 2011
ambiguity. We show that in such contexts robust estimation methods are essential for (i) limiting the sensitivity of robust … robust estimation methodology, applicable to many economic settings of ambiguity. In the robust portfolio problem, unknown … good fraction of these biases can be eliminated, using our robust estimation approach. Finally, in a real-data application …
Persistent link: https://www.econbiz.de/10009273101
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Time-varying risk premium in large cross-sectional equidity datasets
Gagliardini, Patrick; Ossola, Elisa; Scaillet, Olivier - 2011
address consistent estimation of the asymptotic variance, and testing for asset pricing restrictions induced by the no …
Persistent link: https://www.econbiz.de/10009313026
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A penalized two-pass regression to predict stock returns with time-varying risk premia
Bakalli, Gaetan; Guerrier, Stéphane; Scaillet, Olivier - 2021
We develop a penalized two-pass regression with time-varying factor loadings. The penalization in the first pass enforces sparsity for the time-variation drivers while also maintaining compatibility with the no arbitrage restrictions by regularizing appropriate groups of coefficients. The second...
Persistent link: https://www.econbiz.de/10012487589