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This study tests whether the behaviour of daily stock returns for the sample of three banks and the composite index in the Malaysian market are nonlinear dependence. Using three nonlinear testing procedures, the study suggests nonlinearity in the return series for all cases. The cause for the...
Persistent link: https://www.econbiz.de/10014051407
The study provides evidence of the nature of the volatility transmission for daily currency futures contracts traded at the International Monetary Market (IMM) and the Singapore Exchange (SIMEX). The samples of the German mark currency futures contracts and the Japanese yen currency futures...
Persistent link: https://www.econbiz.de/10014051930
Risk-neutral valuation is used to value a portfolio and decompose it into the components accruing to its stakeholders. The analysis incorporates managers' expected performance and contract renewal issues. A managed portfolio's economic value is shown to differ from its net asset value. A better...
Persistent link: https://www.econbiz.de/10012998046
This study examines the effect of option volume relative to stock volume (O/S) on market response to earnings surprises. The market reaction per unit of earnings surprise is lower for firms that have high O/S prior to earnings announcement than for firms with low O/S prior to earnings...
Persistent link: https://www.econbiz.de/10013006848
This paper proposes a tail risk index, TIX, as the growth rate of the model-free cumulant generating function of market risk calculated from index option prices. It captures the power law decay rate of the left tail of future return distributions, and thus reflects market beliefs about the...
Persistent link: https://www.econbiz.de/10012968420
We derive the theoretical relation between the term structure of implied variance and the expected excess returns of the underlying asset. Adopting three alternative approaches to compile the variables representing the information on the implied volatility index level and term structure, we show...
Persistent link: https://www.econbiz.de/10012972853
This article explores the role of the realized return distribution in the formation of the observed implied volatility smile using the framework of an adaptive expectations model. According to this framework investors update their expectations of future events, through which options are priced,...
Persistent link: https://www.econbiz.de/10012954838
We compile option-implied tail loss and gain measures based on a deep out-of-the- money option pricing formula derived by applying ‘extreme value theory', and then use these measures to investigate the information content of option-implied tail risk on the future returns of the underlying...
Persistent link: https://www.econbiz.de/10012955241