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A diffusion approximation to the Markov chains model of the financial market and the expected riskless profit under selling of call and put options

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....

Persistent link: https://www.econbiz.de/10010293729

Default dependence: The equity default relationship

Turnbull, Stuart M.; Yang, Jun - 2008

The paper examines three equity-based structural models to study the nonlinear relationship between equity and credit default swap (CDS) prices. These models differ in the specification of the default barrier. With cross-firm CDS premia and equity information, we are able to estimate and compare...

Persistent link: https://www.econbiz.de/10010279892

The equity premium and the volatility spread: The role of risk-neutral skewness

Feunou, Bruno; Fontaine, Jean-Sébastien; Tedongap, Roméo - 2009

for option pricing and show that the information content of skewness leads to improved in-sample and out-of-sample pricing … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that … and does not offer sufficient flexibility to match the skewness and kurtosis implicit in option data. Finally, we document …

Persistent link: https://www.econbiz.de/10010279907

Price discovery in Canadian Government bond futures and spot markets

Chung, Christopher; Campbell, Bryan; Hendry, Scott - 2007

In this paper we look at the relative information content of cash and futures prices for Canadian Government bonds. We follow the information-share approaches introduced by Hasbrouck (1995) and Harris et al (1995), applying the techniques in Gonzalo-Granger (1995), to evaluate the relative...

Persistent link: https://www.econbiz.de/10010279977

Price discovery in Canadian and US 10-year government bond markets

Campbell, Bryan; Hendry, Scott - 2007

This paper presents some new results on the price discovery process in both the Canadian and U.S. 10-year Government bond markets using high-frequency data not previously analyzed. Using techniques introduced by Hasbrouck (1995) and Gonzalo-Granger (1995), we look at the relative information...

Persistent link: https://www.econbiz.de/10010280019

Measures of aggregate credit conditions and their potential use by central banks

García, Alejandro; Prokopiw, Andrei - 2009

Understanding the nature of credit risk has important implications for financial stability. Since authorities notably, central banks focus on risks that have systemic implications, it is crucial to develop ways to measure these risks. The difficulty lies in finding reliable measures of aggregate...

Persistent link: https://www.econbiz.de/10010289723