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Understanding Short and Long-Run Risk Premia

Buraschi, Andrea - 2013

This paper studies the predictability of S&P500 returns using short term risk premia as a conditioning variable. We construct dividend prices using futures data and identify short term risk premia by projecting excess returns of dividend claims on their lagged prices. Regression results for...

Persistent link: https://www.econbiz.de/10013091355

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

Dividend Risk and the Cross-Section of Equity Risk Premia

Picca, Antonio - 2014

I study a novel data set of short-term dividend futures contracts for individual stocks. I combine this data with dividend forecasts from equity research analysts to construct a model-free measure of short-term equity risk premia. I provide the first description of the cross-section of risk...

Persistent link: https://www.econbiz.de/10013043334

Modeling Conditional Factor Risk Premia Implied by Index Option Returns

Fournier, Mathieu; Jacobs, Kris; Orłowski, Piotr - 2021

We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk premia can vary nonlinearly with states. The model is estimated using regressions, with minimal assumptions on factor and option return dynamics. Using index options, we...

Persistent link: https://www.econbiz.de/10013213854

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

Detecting Arbitrage in the Foreign Exchange Market

Cui, Zhenyu - 2018

) arbitrage opportunities among spot currency exchange rates in a foreign exchange market. We obtain sufficient conditions for … excluding the triangular arbitrage opportunities in a market with or without market frictions, i.e. transaction costs. Then we … propose a very efficient computational approach not only to detect triangular arbitrage opportunities in real time but also to …

Persistent link: https://www.econbiz.de/10012921244

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

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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