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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

Time-changed Lévy LIBOR market model for the joint estimation and pricing of caps and swaptions

Leippold, Markus; Stromberg, Jacob - 2012 - This version: May 18, 2012

We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes are split into three components. The first component allows us to match the volatility term structure, the second generates stochastic volatility, and the third one...

Persistent link: https://www.econbiz.de/10009558358

Managing the risks of corporate bond portfolios : new evidence in the light of the sub‐prime crisis

Barone-Adesi, Giovanni; Carcano, Nicola; Dall'O, Hakim - 2012

We consider modeling errors in the hedging of a portfolio composed from BBB-rated bonds. By doing this, we open a new perspective to the debate on the relationship between corporate bonds and CDS spreads. We find that in ordinary times the added value of indexlinked credit derivatives is very...

Persistent link: https://www.econbiz.de/10009558422

Dynamics of interest rate swap and equity volatilities

Mele, Antonio; Obayashi, Yoshiki; Shalen, Catherine T. - 2013

While CBOE's VIX index is widely acknowledged as a broad-based investor “fear gauge” for its strong inverse relationship with major equity indexes, one cannot necessarily expect it to translate to the level of future turbulence or investor risk aversion in fixed-income markets. Indeed,...

Persistent link: https://www.econbiz.de/10009750617

Liquidity risk in credit default swap markets

Junge, Benjamin; Trolle, Anders B. - 2013

We show that liquidity risk is priced in the cross section of returns on credit default swaps (CDSs). We measure CDS market illiquidity by aggregating deviations of credit index levels from their no-arbitrage values implied by the index constituents' CDS spreads, and we construct a tradable...

Persistent link: https://www.econbiz.de/10010258589

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

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

This paper shows that the VIX market contains information on the variance of the S&P 500 returns, which is not already spanned by the S&P 500 market. We estimate a flexible affine model based on a joint time series of underlying indexes and option prices on both markets. We find that including...

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

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

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

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

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

CDS central counterparty clearing default measures : road to recovery or invitation to predation?

Tywoniuk, Magdalena - 2020

Following the 2008 financial crisis, regulation mandates the clearing of the CDS market through Central Clearing Counter-parties (CCPs). Large CCPs are now designated as 'Global Systemically Important Institutions' (GSIIs), whose unlikely-but-plausible failure threatens global financial market...

Persistent link: https://www.econbiz.de/10012419635