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Momentum and Reversion in Risk Neutral Martingale Probabilities

Madan, Dilip B. - 2014

A time homogeneous, purely discontinuous, parsimonous Markov martingale model is proposed for the risk neutral dynamics … additionally reported. It is observed that risk neutral dynamics by and large reflect the presence of momentum in numerous … probabilities. However, there is some reversion in the upper quantiles of risk neutral return distributions …

Persistent link: https://www.econbiz.de/10013064149

Risk Conscious Investment

Madan, Dilip B.; Schoutens, Wim; Wang, King - 2022

The risk conscious investor is defined as the maximizer of a conservative valuation or dynamically a nonlinear …

Persistent link: https://www.econbiz.de/10013492258

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

Portfolio Theory for Squared Returns Correlated Across Time

Eberlein, Ernst - 2016

Allowing for correlated squared returns across two consecutive periods, portfolio theory for two periods is developed. This correlation makes it necessary to work with non-Gaussian models. The two period conic portfolio problem is formulated and implemented. This development leads to a mean ask...

Persistent link: https://www.econbiz.de/10013004140

Heterogeneity in Beliefs and Volatility Tail Behavior

Bakshi, Gurdip - 2012

We propose a model of volatility tail behavior, in which the pricing measure dominates the physical measure in both tails of the volatility distribution and, hence, the derived pricing kernel exhibits an increasing and decreasing region in the volatility dimension. The model features investors...

Persistent link: https://www.econbiz.de/10013108996

Madan, Dilip B. - 2018

halted risk neutrally. Selfsimilar components are estimated to have a physical half life between one or two days and a risk … Sharpe ratios are developed. Additionally long horizon return modeling is employed to construct alternative long horizon risk …

Persistent link: https://www.econbiz.de/10012930270

Zero Covariation Returns

Madan, Dilip B. - 2017

Asset returns are modeled by bilateral gamma processes with zero covariations. Covariances are then observed to be consequences of randomness in variations. Support vector machine regressions on prices are employed to model the implied randomness. The contributions of support vector machine...

Persistent link: https://www.econbiz.de/10012943431

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

Efficient Estimation of Expected Stock Price Returns

Madan, Dilip B. - 2017

Daily asset returns are modeled using self decomposable limit laws and the structure is used to estimate the density of the uncentered data. Estimates of mean returns are a byproduct of the density estimate. Estimates of mean returns via density estimation have significantly lower standard...

Persistent link: https://www.econbiz.de/10012966101

Stochastic Power Variations in Financial Returns

Madan, Dilip B.; Wang, King - 2022

linear in time while skewness and kurtosis maintain high levels in perpetuity. Risk neutrally there is momentum in volatility … and mean reversion in skewness. Risk neutral volatility and skewness are inversely related while kurtosis is positively …

Persistent link: https://www.econbiz.de/10013306938

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