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derivatives are traded primarily over the counter. I capture the limits of arbitrage in this market in a simple asset-pricing …-bearing capacity have particularly strong forecasting power for energy returns, both in sample and out of sample. -- Asset pricing …
Persistent link: https://www.econbiz.de/10003947918
In this paper we introduce a discrete time pricing model for a European call option when the log-return of the … pricing errors …
Persistent link: https://www.econbiz.de/10013130931
Market clichés assert that markets take escalators up and elevators down. The observation suggests differentiating models for up and down moves. Non-diffusive models allow for this and we model the move as the difference of two independent mean reverting increasing processes driven by gamma...
Persistent link: https://www.econbiz.de/10012959879
derivatives are traded primarily over the counter. I capture the limits of arbitrage in this market in a simple asset pricing …
Persistent link: https://www.econbiz.de/10012857609
Multivariate return distributions consistent with bilateral gamma marginals are formulated and termed multivariate bilateral gamma (MBG). Tail probability distances and Wasserstein Distances between return data, model simulations and their squares evaluate model performance. A full Gaussian...
Persistent link: https://www.econbiz.de/10012834626
Risk-neutral valuation is used to value a portfolio and decompose it into the components accruing to its stakeholders. The analysis incorporates managers' expected performance and contract renewal issues. A managed portfolio's economic value is shown to differ from its net asset value. A better...
Persistent link: https://www.econbiz.de/10012998046
Allowing for correlated squared returns across two consecutive periods, portfolio theory for two periods is developed. This correlation makes it necessary to work with non-Gaussian models. The two period conic portfolio problem is formulated and implemented. This development leads to a mean ask...
Persistent link: https://www.econbiz.de/10013004140
We show that idiosyncratic jumps are a key determinant of mean stock returns from both an ex post and ex ante perspective. Ex post, the entire annual average return of a typical stock accrues on the four days on which its stock price jumps. Ex ante, idiosyncratic jump risk earns a premium: a...
Persistent link: https://www.econbiz.de/10012967984
proxy for time-varying systematic risk. Relative to riskier assets, the proportionate value of contraction options increase …
Persistent link: https://www.econbiz.de/10013026825
I show that the inventory risk faced by market-makers has a first-order effect on option prices. I introduce a simple approach that decomposes the price impact of trades into inventory risk and asymmetric information components. While both components are large for option trades, the inventory...
Persistent link: https://www.econbiz.de/10013037472