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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

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 …-form and structural models of stochastic volatility …

Persistent link: https://www.econbiz.de/10011412294

Cash sub-additive risk measures and interest rate ambiguity

El Karoui, Nicole; Ravanelli, Claudia - 2008

A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub-additive axiom to preserve the original difference between the numeraire of...

Persistent link: https://www.econbiz.de/10003961489

Economically consistent valuations and put-call parity

Herdegen, Martin; Schweizer, Martin - 2016 - This version: January 12, 2016

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

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

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

Dependent defaults and losses with factor copula models

Ackerer, Damien; Vatter, Thibault - 2016

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

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

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

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