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Explaining asset pricing puzzles associated with the 1987 market crash
Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010
The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for …
Persistent link: https://www.econbiz.de/10010292171
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Implied Volatility and Risk Aversion in A Simple Model with Uncertain Growth
Lundtofte, Frederik - Institut für Schweizerisches Bankwesen <Zürich> - 2006
volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied …
Persistent link: https://www.econbiz.de/10005858509
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Pricing American options under stochastic volatility: A new method using Chebyshev polynomials to approximate the early exercise boundary
Tzavalis, Elias; Wang, Shijun - 2003
This paper presents a new numerical method for pricing American call options when the volatility of the price of the … volatility changes, we derive an integral representation of an American call price and the early exercise premium which holds … under stochastic volatility. This representation is used to develop a numerical method for pricing the American options …
Persistent link: https://www.econbiz.de/10010284217
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American Parisian Options
Chesney, Marc; Gauthier, Laurent - Institut für Schweizerisches Bankwesen <Zürich> - 2006
In this article, we describe the various sorts of American Parisian options and propose valuation formulae. Although there is no closed-form valuation for these products in the non perpetual case, we have been able to reformulate their price as a function of the exercise frontier. In the...
Persistent link: https://www.econbiz.de/10005858581
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Asset Pricing with Matrix Jump Diffusions
Leippold, Markus; Trojani, Fabio - Swiss National Centre of Competence in Research North … - 2010
stochastically correlated default intensities, ormultivariate dynamic portfolio choice with volatility and correlation jumps. We then … dynamic portfolio choice. First, we find that a three-factor matrix AJD model can generatevariations of the implied volatility … skew term structures that are largely unrelated to the level andcomposition of the spot volatility.[...] …
Persistent link: https://www.econbiz.de/10009248844
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When Uncertainty Blows in the Orchard: Comovementand the Equilibrium Volatility Risk Premia
Buraschi, Andrea; Trojani, Fabio; Vedolin, Andrea - Swiss National Centre of Competence in Research North … - 2010
In a Lucas orchard with heterogeneous beliefs, we study the link between market-wide uncertainty, difference of opinionsand co-movement of stock returns. We show that this link plays an important role in explaining the dynamics of equilibriumvolatility and correlation risk premia. In our...
Persistent link: https://www.econbiz.de/10009305103
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Libor Market Model with Regime-Switching Volatility
Elliott, Robert; Valchev, Stoyan - Institut für Schweizerisches Bankwesen <Zürich> - 2004
This paper provides regime-switching stochastic volatility extensions of the LIBOR market model. First, the … instantaneous forward LIBOR volatility is modulated by a continuous time homogeneous Markov chain. In a second parameterization, the … volatility is modelled by a square root process with a regime-switching reference level. We obtain analytical solutions for the …
Persistent link: https://www.econbiz.de/10005858810
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Risk Management for Derivatives in Illiquid Markets : A Simulation-Study
Frey, Rüdiger; Patie, Pierre - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002
new explanation of the smile pattern of implied volatility related to the lack of market liquidity. Finally we present …
Persistent link: https://www.econbiz.de/10005859384
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Can standard preferences explain the prices of out-of-the-money S&P 500 put options?
Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2011
dramatically and permanently changed the shape of the implied volatility curve for equity index options. Here, we propose a general …. Further, the model generates a steep shift in the implied volatility 'smirk' for S&P 500 options after the 1987 crash. This …
Persistent link: https://www.econbiz.de/10010292137
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Jumps in option prices and their determinants: Real-time evidence from the E-mini S&P 500 option market
Kapetanios, George; Neumann, Michael; Skiadopoulos, George - 2014
We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the...
Persistent link: https://www.econbiz.de/10011381002