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Option-implied information and predictability of extreme returns
Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013
We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...
Persistent link: https://www.econbiz.de/10010226098
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Active Portfolio Management, Positive Jensen-Jarrow Alpha, and Zero Sets of CAPM
Charles-Cadogan, G. - 2011
We present conditions under which positive alpha exists in the realm of active portfolio management - in contrast to the controversial result in (Jarrow (2010) which implicates delegated portfolio management by surmising that positive alphas are illusionary. Specifically, we show that the...
Persistent link: https://www.econbiz.de/10013117245
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Cross-Hedging Minimum Return Guarantees : Basis and Liquidity Risk
Ankirchner, Stefan - 2013
We reveal pitfalls in the hedging of insurance contracts with a minimum return guarantee on the underlying investment, e.g.\ an external mutual fund. We analyze basis risk entailed by hedging the guarantee with a dynamic portfolio of proxy assets for the funds. We also take account of liquidity...
Persistent link: https://www.econbiz.de/10013089338
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Embedded Leverage
Frazzini, Andrea - 2020
Many financial instruments are designed with embedded leverage such as options and leveraged exchange traded funds (ETFs). Embedded leverage alleviates investors' leverage constraints and, therefore, we hypothesize that embedded leverage lowers required returns. Consistent with this hypothesis,...
Persistent link: https://www.econbiz.de/10012837946
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Expected Equity Returns Should Correlate with Idiosyncratic Risk
Bruno, Giovanni - 2018
law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …
Persistent link: https://www.econbiz.de/10012910108
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Filtering and Portfolio Optimization with Stochastic Unobserved Drift in Asset Returns
Fouque, Jean-Pierre - 2017
We consider the problem of filtering and control in the setting of portfolio optimization in financial markets with random factors that are not directly observable. The example that we present is a commodities portfolio where yields on futures contracts are observed with some noise. Through the...
Persistent link: https://www.econbiz.de/10012974123
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Multi-Asset Seasonality and Trend-Following Strategies
Baltas, Nick - 2016
This paper investigates the seasonality patterns within various asset classes. We find that a strategy that buys the assets with the largest same-calendar-month past average returns (up to ten years) and sells the assets with the smallest same-calendar-month past average returns, earns...
Persistent link: https://www.econbiz.de/10013002295
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Valuing Variable Annuity Guarantees on Multiple Assets
Ziveyi, Jonathan - 2015
Guarantees embedded variable annuity contracts exhibit option-like payoff features and the pricing of such instruments naturally leads to risk neutral valuation techniques. This paper considers the pricing of two types of guarantees; namely, the Guaranteed Minimum Maturity Benefit and the...
Persistent link: https://www.econbiz.de/10013011325
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Risk-Return Analysis of Dynamic Investment Strategies
Bruder, Benjamin - 2014
The investment management industry has developed such a wide range of trading strategies, that many investors feel lost when they have to choose the investment style that meets their requirements. Comparing these on a like-for-like basis is a difficult task about which much has been written. The...
Persistent link: https://www.econbiz.de/10013050989
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The Risk of Skewness and Kurtosis in Oil Market and the Cross-Section of Stock Returns
Ebrahimi, Nima - 2018
We show that exposure to the risk of kurtosis in oil market drives the cross-section of stock returns from 1996 to 2014. The average monthly difference between the return of portfolio of stocks with low exposure and high exposure to the risk of kurtosis is -0.37%, showing that higher exposure to...
Persistent link: https://www.econbiz.de/10012920695