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Boyarchenko, Nina; Fuster, Andreas; Lucca, David O. - 2014

Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...

Persistent link: https://www.econbiz.de/10010404146

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

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

An Equilibrium Pricing for OTC Derivatives with Collateralization. Application of Economic Premium Principle

Takino, Kazuhiro - 2016

In this article, we propose an equilibrium pricing rule for the contingent claims by applying the economic premium principle initiated by Buhlmann (1980). The derivative markets in our model are over-the-counter (OTC) markets and have counterparty risks. We reconstruct the economic premium...

Persistent link: https://www.econbiz.de/10012999558

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

The contribution of frictions to expected returns

Hirakiy, Kazuhiro; Skiadopoulos, George - 2018

We derive a model-free option-based formula to estimate the contribution of market frictions to expected returns (CFER) within an asset pricing setting. We estimate CFER for the U.S. optionable stocks. We document that CFER is sizable, it predicts stock returns and it subsumes the effect of...

Persistent link: https://www.econbiz.de/10011932555

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

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

Arbitrage of Single Stocks Versus Futures in India

Slivka, Ronald T. - 2012

fairly valued equity futures depends heavily on the existence of active arbitrage in which stocks and futures are paired off … against one another by professional arbitrageurs seeking to exploit any mispricing. Current constraints on efficient arbitrage … execution. The result of these costs and constraints is that stock versus futures arbitrage in India is presently confined …

Persistent link: https://www.econbiz.de/10013113638

Stock Index Arbitrage in the Turkish Market

Slivka, Ronald T. - 2016

For the first time in the Turkish stock market, the width of the zero arbitrage band for BIST 30 stock index arbitrage … costs. This study also extends the literature of stock index arbitrage by utilizing intraday data to compute returns for … forward and reverse BIST 30 arbitrage once per minute for 2014 and 2015 futures contracts. These returns enable identification …

Persistent link: https://www.econbiz.de/10013003009

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