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Diverging roads: Theory-based vs. machine learning-implied stock risk premia
Grammig, Joachim; Hanenberg, Constantin; Schlag, Christian - 2020
We assess financial theory-based and machine learning-implied measurements of stock risk premia by comparing the quality of their return forecasts. In the low signal-to-noise environment of a one month horizon, we find that it is preferable to rely on a theory-based approach instead of engaging...
Persistent link: https://www.econbiz.de/10012164041
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Diverging Roads : Theory-Based vs. Machine Learning-Implied Stock Risk Premia
Grammig, Joachim - 2020
We assess financial theory-based and machine learning-implied measurements of stock risk premia by comparing the quality of their return forecasts. In the low signal-to-noise environment of a one-month horizon, it is preferable to rely on a theory-based approach instead of engaging in...
Persistent link: https://www.econbiz.de/10012841742
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Diverging roads: theory-based vs. machine learning-implied stock risk premia
Grammig, Joachim; Hanenberg, Constantin; Schlag, Christian - 2020
We assess financial theory-based and machine learning-implied measurements of stock risk premia by comparing the quality of their return forecasts. In the low signal-to-noise environment of a one month horizon, we find that it is preferable to rely on a theory-based approach instead of engaging...
Persistent link: https://www.econbiz.de/10012163064
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Is Jump Risk Priced? What We Can (and Cannot) Learn From Option Hedging Errors
Branger, Nicole; Schlag, Christian - 2004
option hedging errors. We derive a closed-form solution for the option hedging error and its expecta- tion in a stochastic …, the expected hedging error cannot identify the exact structure of the compensation for jump risk. Furthermore, we derive … closed form solutions for the expected option hedging error under discrete trading and model mis-specification. Compared to …
Persistent link: https://www.econbiz.de/10010316083
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An Economic Motivation for Variance Contracts
Branger, Nicole; Schlag, Christian - Universität <Münster, Westfalen> / Lehrstuhl für … - 2005
Variance contracts permit the trading of ’variance risk’, i.e. the risk that the realizedvariance of stock returns changes randomly over time. We discuss why investorsmight want to trade this type of risk, and why they might prefer a variance contractto standard calls and puts for this...
Persistent link: https://www.econbiz.de/10005867623
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Model Risk: A Conceptual Framework for RiskMeasurement and Hedging
Branger, Nicole; Schlag, Christian - Universität <Münster, Westfalen> / Lehrstuhl für … - 2004
The vast majority of approaches to risk management, hedging, or portfolio planningassume that some model is given … much too complicated to solve in realisticmodel setups, we furthermore discuss robust hedging strategies determined …
Persistent link: https://www.econbiz.de/10005867667
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Volatility-of-Volatility Risk
Huang, Darien - 2018
We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility measures, identified model-free from options data as the VIX...
Persistent link: https://www.econbiz.de/10012937769
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Volatility-of-Volatility Risk
Schlag, Christian - 2020
We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility measures, identified model-free from the option price data...
Persistent link: https://www.econbiz.de/10012852246
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Volatility-of-volatility risk
Huang, Darien; Schlag, Christian; Shaliastovich, Ivan; … - 2018
We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility measures, identified modelfree from the option price data as...
Persistent link: https://www.econbiz.de/10011849232
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"Nobody is perfect": Asset pricing and long-run survival when heterogeneous investors exhibit different kinds of filtering errors
Branger, Nicole; Schlag, Christian; Wu, Lue - 2015
In this paper we analyze an economy with two heterogeneous investors who both exhibit misspecified filtering models for the unobservable expected growth rate of the aggregated dividend. A key result of our analysis with respect to long-run investor survival is that there are degrees of model...
Persistent link: https://www.econbiz.de/10011315454