This paper analyzes the valuation of day-ahead Physical Transmission Rights (PTRs) on the German-Dutch interconnector. From a financial perspective, PTRs are options written on the difference between the German and Dutch hourly electricity prices. We propose a model for the valuation of...

By extending and reviewing determinants of the implied volatility in the context of high frequency (HF) trade-by-trade DAX equity options from the EUREX a mean-reversion autocorrelation process is revealed, besides confirming low frequency results such as moneyness, time, liquidity, volume and...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

Recent empirical evidence suggests that the variance risk premium predicts aggregate stock market returns. We demonstrate that statistical finite sample biases cannot “explain” this apparent predictability. Further corroborating the existing evidence of the U.S., we show that country...

Over-allotment arrangements are nowadays part of almost any initial public offering. The underwriting banks borrow stocks from the previous shareholders to issue more than the initially announced number of shares. This is combined with the option to cover this short position at the issue price....

The aim of this paper is twofold: to investigate how the information content of implied volatility varies according to moneyness and option type and to compare option-based forecasts with historical volatility. The different information content of implied volatility is examined for the most...

One of the most noticeable stylized facts in finance is that stock index returns are negatively correlated with changes in volatility. The economic rationale for the effect is still controversial. The competing explanations have different implications for the origin of the relationship: Are...

We examine the impact of dynamic hedging demand of German option and discount certificate markets on the autocorrelation of German stock price changes. We theoretically model the demand of liquidity providers in the discount certificate market, a structured financial product with a concave...