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The Pricing of Market Jumps in the Cross-Section of Stocks and Options
Babaoglu, Kadir - 2018
Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...
Persistent link: https://www.econbiz.de/10012936701
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Returns of Claims on the Upside and the Viability of U-Shaped Pricing Kernels
Bakshi, Gurdip - 2018
When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...
Persistent link: https://www.econbiz.de/10012940716
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The Pricing Kernel Is U-shaped
Sichert, Tobias - 2020
Numerous studies find S-shaped pricing kernels, which is conflicting with standard theory. In contrast to that, based on a novel GARCH model with structural breaks, I show that the pricing kernel is consistently U-shaped. The results are robust to variations in the methodology and hold for...
Persistent link: https://www.econbiz.de/10012853175
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Beta risk in the cross-section of equities
Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017
We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...
Persistent link: https://www.econbiz.de/10011646407
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Arbitraging Mispriced Assets with Separation Portfolios to Lessen Total Risk
Apreda, Rodolfo - 2009
This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market … least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single … separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk …
Persistent link: https://www.econbiz.de/10013159871
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Arbitrage, Idiosyncratic Risk and the Rationality of Discounts on Closed-End Funds
Gemmill, Gordon - 2011
is an arbitrage cap on its premium resulting from new issues. This censors the distribution of the premium and causes its …
Persistent link: https://www.econbiz.de/10013128561
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Chapter 10 Arbitrage, state prices and portfolio theory
Dybvig, Philip H.; Ross, Stephen A. - 2003
equivalence of absence of arbitrage, the existence of a positive linear pricing rule, and the existence of an optimum for some …
Persistent link: https://www.econbiz.de/10014023861
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Global Political Risk and Currency Momentum
Filippou, Ilias - 2016
. Our results are robust after controlling for transaction costs, reversals and alternative limits to arbitrage. The global …
Persistent link: https://www.econbiz.de/10013005726
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Arbitrage Opportunity, Impossible Frontier, and Logical Circularity in CAPM Equilibrium
Abad, Pharos - 2020
Persistent link: https://www.econbiz.de/10012841039
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Limits to Arbitrage, Investor Sentiment, and Factor Returns in International Government Bond Markets
Zaremba, Adam - 2019
the relationships between the performance of these strategies and market-wide measures of limits to arbitrage and investor … sentiment. We find that the defensive strategy performs best during tight arbitrage conditions whereas severe limits to … arbitrage negatively affect momentum profits …
Persistent link: https://www.econbiz.de/10012893037