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A Term Structure Model and the Pricing of Interest Rate Derivative
Sandmann, K.; Sondermann, D. - University of Bonn, Germany - 1993
The paper developes a general arbitrage free model for the term structure of interest rates. The principal model is formulated in a discrete time structure. It differs substantially from the Ho--Lee-- Model (1986) and does not generate negative spot and forward rates. The results for the...
Persistent link: https://www.econbiz.de/10005032172
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Term Structure Models of Commodity Prices: A Review.
Lautier, Delphine - Université Paris-Dauphine - 2005
prices, are presented. The fourth section examines the two main applications of term structure models: hedging and valuation …
Persistent link: https://www.econbiz.de/10008790066
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Term Structure Models of Commodity Prices: A Review
Lautier, Delphine - Université Paris-Dauphine (Paris IX) - 2005
prices, are presented. The fourth section examines the two main applications of term structure models: hedging and valuation …
Persistent link: https://www.econbiz.de/10011166285
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The Efficiency of the Japanese Equity Market
Nagayasu, Jun - International Monetary Fund (IMF) - 2003
Using the ARFIMA-FIGARCH model, this paper studies the efficiency of the Japanese equity market by examining the statistical properties of the return and volatility of the Nikkei 225. It shows that both follow a long range dependence, which stands against the efficient market hypothesis (EMH)....
Persistent link: https://www.econbiz.de/10005825859
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Deriving Market Expectations for the Euro-Dollar Exchange Rate From Option Prices
Krichene, Noureddine - International Monetary Fund (IMF) - 2004
Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and...
Persistent link: https://www.econbiz.de/10005605330
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Exchange Options
Jamshidian, Farshid - Volkswirtschaftliche Fakultät, … - 2007
chronologically. The principles and techniques of hedging and unique pricing are illustrated for the two simplest nontrivial examples … option price function is highlighted. Equivalent martingale measures are utilized to show unique pricing with bounded deltas … (and in the nondegenerate case unique hedging) and to exhibit the PDE or closed-form solutions as numeraire …
Persistent link: https://www.econbiz.de/10005619898
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Estimating a Structural Model of Herd Behavior in Financial Markets
Guarino, Antonio; Cipriani, Marco - International Monetary Fund (IMF) - 2010
We develop a new methodology to estimate the importance of herd behavior in financial markets: we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. We estimate...
Persistent link: https://www.econbiz.de/10008777025
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Numeraire Invariance and application to Option Pricing and Hedging
Jamshidian, Farshid - Volkswirtschaftliche Fakultät, … - 2008
This is a short version of the paper of Exchange Options (2007), concentrating on the principle of numeraire invariance. It emphasizes application to unique pricing in arbitrage-free model, the derivation of hedge ratios and the PDE when price ratios are diffusions, explicit representations in...
Persistent link: https://www.econbiz.de/10005787005
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Extracting implicit density functions from short term interest rate options
Nielsen, Hannah - Sonderforschungsbereich 373, Quantifikation und … - 2001
Using option prices the expectations of the market participants concerning the underlying asset can be extracted as well as the uncertainty surrounding these expectations. In this paper a mixture of lognormal density functions will be assumed to analyze options on three-month Euribor futures for...
Persistent link: https://www.econbiz.de/10010956475
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Interest rate convexity and the volatility smile
Boenkost, Wolfram; Schmidt, Wolfgang M. - Frankfurt School of Finance and Management - 2006
When pricing the convexity effect in irregular interest rate derivatives such as, e.g., Libor-in-arrears or CMS, one often ignores the volatility smile, which is quite pronounced in the interest rate options market. This note solves the problem of convexity by replicating the irregular interest...
Persistent link: https://www.econbiz.de/10009642580