Similar Search Results

Risk-Neutralizing Statistical Distributions : With an Application to Pricing Reinsurance Contracts on Fdic Losses

Madan, Dilip B. - 2005

This paper proposes methods for obtaining risk neutral distributions when only the statistical density is observed. We employ renormalized exponential tilts and estimate the tilt coefficients from related options markets. Particular emphasis is placed on reinsurance losses for which we price in...

Persistent link: https://www.econbiz.de/10012737374

Designing Countercyclical and Risk Based Aggregate Deposit Insurance Premia

Jarrow, Robert A. - 2014

This paper proposes an aggregate deposit insurance premium design that is risk-based in the sense that the premium structure ensures the deposit insurance system has a target of survival over the longer term. Such a premium system naturally exceeds the actuarily fair value and leads to a growth...

Persistent link: https://www.econbiz.de/10012709524

Pricing the Risks of Default

Madan, Dilip B. - 1998

This paper models default risk as composed of arrival and magnitude risks. In our model the two default components are explicitly priced as if they were traded in the futures market and the spot price of risky debt is derived as a consequence. We develop estimation strategies to evaluate the...

Persistent link: https://www.econbiz.de/10012791076

Measuring the Benefits of Diversification Across Portfolios

Madan, Dilip B.; Wang, King - 2021

A portfolio diversification index is defined as the ratio of an equivalent number of independent assets to the number … of assets. The equivalence is based on either attaining the same diversification benefit or spread reduction. The … diversification benefit is the difference in value of a value maximizing portfolio and the maximum value of the components. The spread …

Persistent link: https://www.econbiz.de/10013236444

Capital Adequacy of Financial Enterprises

De Jong, Piet - 2011

Financial entities commonly go bankrupt with disastrous consequences for individuals and society These consequences arise since bankrupt limited liability company is not responsible for losses exceeding its financial resources. Such losses are carried by unsecured creditors or, in the case of...

Persistent link: https://www.econbiz.de/10013130184

Pricing product options and using them to complete markets for functions of two underlying asset prices

Madan, Dilip B.; Wang, King - In: Journal of Risk and Financial Management 14 (2021) 8, pp. 1-19

Options paying the product of put and/or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The...

Persistent link: https://www.econbiz.de/10013201039

Arbitrage free approximations to candidate volatility surface quotations

Madan, Dilip B.; Schoutens, Wim - In: Journal of Risk and Financial Management 12 (2019) 2, pp. 1-21

It is argued that the growth in the breadth of option strikes traded after the financial crisis of 2008 poses difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain approximations are proposed as an alternative. They are shown...

Persistent link: https://www.econbiz.de/10012611129

Hedging contingent claims on semimartingales

Jarrow, Robert; Madan, Dilip B. - In: Finance and Stochastics 3 (1999) 1, pp. 111-134

This paper extends the known results on the equivalence between market completeness and the uniqueness of martingale measures for finite asset economies, to the infinite asset case. Our arguments employ results from the theory of linear operators between locally convex topological vector spaces....

Persistent link: https://www.econbiz.de/10005390654

Stochastic Volatility for Levy Processes

Geman, Hélyette; Carr, Peter; Madan, Dilip B.; Yor, Marc - Université Paris-Dauphine (Paris IX) - 2003

Three processes reflecting persistence of volatility are initially formulated by evaluating three Lévy processes at a time change given by the integral of a mean-reverting square root process. The model for the mean-reverting time change is then generalized to include non-Gaussian models that...

Persistent link: https://www.econbiz.de/10010905341

Stochastic volatility, jumps and hidden time changes

Yor, Marc; Madan, Dilip B.; Geman, Hélyette - In: Finance and Stochastics 6 (2002) 1, pp. 63-90

Stochastic volatility and jumps are viewed as arising from Brownian subordination given here by an independent purely discontinuous process and we inquire into the relation between the realized variance or quadratic variation of the process and the time change. The class of models considered...

Persistent link: https://www.econbiz.de/10005613455