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volatilities for moneyness points needed were calculated, then we construct 355 smile curves for calls and puts options to study … investigate the volatility smile derived from liquid call and put options on the Polish WIG20 index which option series expired on …
Persistent link: https://www.econbiz.de/10011984997
We show that the VIX Index structurally underestimates model-free implied volatility because its implementation omits extrapolation of the volatility smile in the tails. We use the asymptotic behavior of the volatility surface to construct a correction term that is model-independent and only...
Persistent link: https://www.econbiz.de/10015192461
This paper uses an extension of the equilibrium model of Lucas (1978) to study the valuation of options on the market … process for aggregate dividend. Closed-form pricing formulas for options on the market portfolio incorporate both stochastic …-Ingersoll-Ross (1985) model. In this sense, the current model provides a consistent way to price options written on the market portfolio …
Persistent link: https://www.econbiz.de/10011940600
announcements and use at-the-money options to exploit their informational advantage. In the post-event period, however, informed … option investors trade by using deep-out-of-the-money and out-of-the-money options. We documented limited evidence on the …
Persistent link: https://www.econbiz.de/10013201357
procedure. I parameterize the underlying exchange rate process as a mixture of log-normals, price the options using Monte Carlo …
Persistent link: https://www.econbiz.de/10010334336
dramatically and permanently changed the shape of the implied volatility curve for equity index options. Here, we propose a general … equilibrium model that captures many salient features of the U.S. equity and options markets before, during, and after the crash … shortmaturity at-the-money and deep out-of- the-money S&P 500 put options, as well as the prices of individual stock options …
Persistent link: https://www.econbiz.de/10010292137
equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium … individual stock options, equity returns, and interest rates. …
Persistent link: https://www.econbiz.de/10010292171
State price density (SPD) contains important information concerning market expectations. In existing literature, a constrained estimator of the SPD is found by nonlinear least squares in a suitable Sobolev space. We improve the behavior of this estimator by implementing a covariance structure...
Persistent link: https://www.econbiz.de/10010274279
We document that a theoretically founded, real-time, and easy-to-implement option-based measure, termed synthetic-stock difference (SSD), accurately estimates the part of stock's expected return arising from stock's transaction costs. We calculate SSD for U.S. optionable stocks. SSD can be more...
Persistent link: https://www.econbiz.de/10014480627
In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...
Persistent link: https://www.econbiz.de/10010309909