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Understanding Mortgage Spreads
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
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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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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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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
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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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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
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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 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