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Instantaneous Arbitrage and the CAPM
Nielsen, Lars Tyge - 2019
This paper studies the concept of instantaneous arbitrage in continuous time and its relation to the instantaneous CAPM …. Absence of instantaneous arbitrage is equivalent to the existence of a trading strategy which satisfies the CAPM beta pricing … relation in place of the market. Thus the difference between the arbitrage argument and the CAPM argument in Black and Scholes …
Persistent link: https://www.econbiz.de/10012894845
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Put Option Exercise and Short Stock Interest Arbitrage
Barraclough, Kathryn - 2013
U.S. exchange-traded stock options are exercisable before expiration. While put options should frequently be exercised early to earn interest, they are not. In this paper, we explain an early exercise decision rule and then examine actual exercise behavior during the period January 1996 through...
Persistent link: https://www.econbiz.de/10013090248
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Squeezing shorts through social news platforms
Allen, Franklin; Nowak, Eric; Pirovano, Matteo; … - 2021 - This draft: April 12, 2021
At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by retail...
Persistent link: https://www.econbiz.de/10012502167
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Market efficiency and limits to arbitrage : evidence from the Volkswagen short squeeze
Allen, Franklin; Haas, Marlene; Nowak, Eric; Tengulov, Angel - 2018
On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen's stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the...
Persistent link: https://www.econbiz.de/10011875647
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Understanding Mortgage Spreads
Boyarchenko, Nina; Fuster, Andreas; Lucca, David O. - 2014
Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...
Persistent link: https://www.econbiz.de/10010404146
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Arbitrage-free models of stocks and bonds
Durham, J. Benson - 2013
A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and …
Persistent link: https://www.econbiz.de/10010222892
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An Asset Pricing Theory of Volatility Tail Behavior
Bakshi, Gurdip - 2012
We contrast two different asset pricing models, where the pricing kernel either (i) increases in the volatility dimension, reflecting investors' aversion to volatility, or (ii) could be non-monotonic in volatility, reflecting heterogeneity in investors' beliefs. The two models yield opposite...
Persistent link: https://www.econbiz.de/10013115088
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Understanding Short and Long-Run Risk Premia
Buraschi, Andrea - 2013
This paper studies the predictability of S&P500 returns using short term risk premia as a conditioning variable. We construct dividend prices using futures data and identify short term risk premia by projecting excess returns of dividend claims on their lagged prices. Regression results for...
Persistent link: https://www.econbiz.de/10013091355
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"Up" and "Down" Levy Jumps and Market Risk Premia Implications from S&P500 Options
Carverhill, Andrew P. - 2020
We model the S&P500 index options dynamics using the CGMY distribution, with independent "up" and "down" return jumps, and diffusive jump intensities. Allowing the up and down parts to be separately parameterised accounts for the dynamic smirk effect, without correlation between returns and...
Persistent link: https://www.econbiz.de/10012837432
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Time-Varying Risk Premiums and Term Premiums in Commodity Futures
Chaves, Denis B. - 2017
Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...
Persistent link: https://www.econbiz.de/10012959999