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Enhancing Enterprise Value by Trading Options

Madan, Dilip B. - 2017

Investment activities are enhanced by a regular positioning in options. Results are presented for the S&P 500 index as …

Persistent link: https://www.econbiz.de/10012958212

Asymmetries in Financial Returns

Madan, Dilip B. - 2017

Market clichés assert that markets take escalators up and elevators down. The observation suggests differentiating models for up and down moves. Non-diffusive models allow for this and we model the move as the difference of two independent mean reverting increasing processes driven by gamma...

Persistent link: https://www.econbiz.de/10012959879

Conic Asset Pricing and the Costs of Price Fluctuations

Madan, Dilip B. - 2017

obtained with a dynamic calibration of a parameteric distortion on the S&P 500 index options market. Results for required …

Persistent link: https://www.econbiz.de/10012962578

Adapted Hedging

Madan, Dilip B. - 2016

hedging strategies can effectively reduce drawdowns in the marked to market value of businesses trading options …

Persistent link: https://www.econbiz.de/10012988873

Pricing Options on Mean Reverting Underliers

Madan, Dilip B. - 2016

equation driven by centered variance gamma shocks. VIX options are calibrated using the square root process. The OU equation … driven by centered variance gamma shocks is applied in pricing options on the ratio of the stock price for J. P. Morgan Chase … option pricing model to market data, we indirectly infer the prices for stock options on JPM from the prices for options on …

Persistent link: https://www.econbiz.de/10012996895

Returns of Claims on the Upside and the Viability of U-Shaped Pricing Kernels

Bakshi, Gurdip - 2018

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Persistent link: https://www.econbiz.de/10012940716

Risk Premia in Option Markets

Madan, Dilip B. - 2015

Risk premia are related to price probability ratios or for continuous time pure jump processes the ratios of jump arrival rates under the pricing and physical measures. The variance gamma model is employed to synthesize densities with risk premia seen as the ratio of the three parameters. The...

Persistent link: https://www.econbiz.de/10013018782

Three Non-Gaussian Models of Dependence in Returns

Madan, Dilip B. - 2015

Three particular models of dependence in asset returns with non-Gaussian marginals are investigated on daily return data for sector exchange traded funds. The first model is a full rank Gaussian copula (FGC). The second models returns as a linear mixture of independent Lévy processes (LML). The...

Persistent link: https://www.econbiz.de/10013018786

Adjusting Exponential Levy Models Towards the Simultaneous Calibration of Market Prices for Crash Cliquets

Carr, Peter - 2015

Option calibrated exponential Lévy models are observed to typically overprice crash cliquets. Typical model Lévy tails are then not crash market consistent. A general tail thinning strategy is introduced that may be implemented on a class of parametric Lévy models closed under exponential...

Persistent link: https://www.econbiz.de/10013018792

Dynamic Conic Hedging for Competitiveness

Madan, Dilip B. - 2015

The paper provides a new hedging methodology permitting systematic hedging choices with wide applications. Dynamic concave bid price, and convex ask price functionals from the recent literature are employed to construct new hedging strategies termed dynamic conic hedging. The primary focus of...

Persistent link: https://www.econbiz.de/10013018793