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Density forecast evaluation and the effect of risk-neutral central moments on the currency risk premium: Test based on EUR/HUF option-implied densities
Csávás, Csaba - 2008
correlation with the central moments. We present evidence that risk-neutral densities do not provide accurate forecasts for the …
Persistent link: https://www.econbiz.de/10010322462
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The impact of the euro on financial markets
Cappiello, Lorenzo; Hördahl, Peter; Kadareja, Arjan; … - 2006
We assess whether the euro had an impact first on the degree of integration of European financial markets, and, second, on the euro area term structure. We propose two methodologies to measure integration: one relies on time-varying GARCH correlations, and the other one on a regression...
Persistent link: https://www.econbiz.de/10011604644
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Can Tests Based on Option Hedging Errors Correctly Identify Volatility Risk Premia?
Branger, Nicole; Schlag, Christian - 2004
Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors … the premium is the same as the sign of the mean hedging error for a large class of stochastic volatility option pricing …
Persistent link: https://www.econbiz.de/10010263305
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Default Risk in Stochastic Volatility Models
Gersbach, Hans; Surulescu, Nicolae - 2010
We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm’s values … default probability. Our simulation results indicate that the stochastic volatility model tends to predict higher default … probabilities than the corresponding Merton model if a firm’s credit quality is not too low. Otherwise the stochastic volatility …
Persistent link: https://www.econbiz.de/10011753195
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A diffusion approximation for the riskless profit under selling of discrete time call options: Non-identically distributed jumps
Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005
A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the...
Persistent link: https://www.econbiz.de/10010293743
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Risk premia in electricity wholesale spot markets: empirical evidence from Germany
Pietz, Matthäus - 2009
This paper contributes to the ongoing discussion on price formation in electricity markets. For this, we conduct an analysis of the German electricity wholesale spot market which is located at the European Energy Exchange (EEX). Our dataset covers three spot market segments, namely the intraday...
Persistent link: https://www.econbiz.de/10010305694
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Risk premia in the German electricity futures market
Pietz, Matthäus - 2009
The mechanism behind price formation in electricity futures markets is still under discussion. Theory suggests that hedging pressure caused by deviating risk preferences is the most promising approach. This paper contributes to this discussion through an empirical investigation of electricity...
Persistent link: https://www.econbiz.de/10010305696
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Foreign exchange option and returns based correlation forecasts: evaluation and two applications
Castrén, Olli; Mazzotta, Stefano - 2005
We compare option-implied correlation forecasts from a dataset consisting of over 10 years of daily data on over …-the-counter (OTC) currency option prices to a set of return-based correlation measures and assess the relative quality of the … correlation forecasts. We find that while the predictive power of implied correlation is not always superior to that of returns …
Persistent link: https://www.econbiz.de/10011604493
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The equilibrium risk premium on the forward market for foreign currency
Broll, Udo; Eckwert, Bernhard - 1996
This paper constructs an intertemporal model of the spot and forward markets for foreign exchange and shows that in equilibrium the forward market is unbiased, i.e., the forward rate is equal to the expected spot rate which will prevail in the market next period. This holds true as long as the...
Persistent link: https://www.econbiz.de/10010398063
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Nonparametric Regression on Latent Covariates with an Application to Semiparametric GARCH-in-Mean Models
Conrad, Christian; Mammen, Enno - 2008
We consider time series models in which the conditional mean of the response variable given the past depends on latent covariates. We assume that the covariates can be estimated consistently and use an iterative nonparametric kernel smoothing procedure for estimating the conditional mean...
Persistent link: https://www.econbiz.de/10011422182