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Pricing interest rate derivatives under volatility uncertainty
Holzermann, Julian - 2020
We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion, which drives the forward rate dynamics. The absence...
Persistent link: https://www.econbiz.de/10012175590
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Radner equilibria under ambiguous volatility
Beißner, Patrick - 2013
The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...
Persistent link: https://www.econbiz.de/10010212527
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Hedging with small uncertainty aversion
Herrmann, Sebastian; Muhle-Karbe, Johannes; Seifried, … - 2016
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on their "distance" to a reference local volatility model. In...
Persistent link: https://www.econbiz.de/10011410718
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Bond pricing under Knightian uncertainty : a short rate model with drift and volatility uncertainty
Hölzermann, Julian - 2018
It is shown how to construct an arbitrage-free short rate model under uncertainty about the drift and the volatility. The uncertainty is represented by a set of priors, which naturally leads to a G-Brownian motion. Within this framework, it is shown how to characterize the whole term structure...
Persistent link: https://www.econbiz.de/10011891263
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Does smooth ambiguity matter for asset pricing?
Gallant, A. Ronald; Jahan-Parvar, Mohammad R.; Liu, Hening - 2018
-varying volatility are preferred to the long-run risk model. We analyze asset pricing implications of the estimated models …
Persistent link: https://www.econbiz.de/10011780610
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Ambiguity, long-run risks, and asset prices
Wei, Bin - 2021
generalized LRR model is as tractable but more flexible due to its separation of ambiguity aversion from both risk aversion and … variance premium puzzle besides the puzzles of the equity premium, the risk-free rate, and the return predictability …. Specifically, the model matches reasonably well key asset-pricing moments with risk aversion under 5. Model calibration shows that …
Persistent link: https://www.econbiz.de/10012617667
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Export decision under risk
Sousa, José de; Disdier, Anne-Célia; Gaigné, Carl - 2016
regularities by developing a new firmbased trade model wherein managers are risk averse. Higher volatility induces the reallocation …
Persistent link: https://www.econbiz.de/10011547934
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What is the investment loss due to uncertainty?
Panagiōtidēs, Theodōros; Printzis, Panagiotis - Leibniz-Institut für Ost- und Südosteuropaforschung - 2019
We investigate the effect of uncertainty on investment. We employ a unique dataset of 25000 Greek firms' balance sheets for 14 years covering the period before and after the eurozone crisis. A dynamic factor model is employed to proxy uncertainty. The investment performance of 14 sectors is...
Persistent link: https://www.econbiz.de/10012060122
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Uncertainty over exchange rates and exports : evidence from dispersion of expectations as a measure of uncertainty
Morikawa, Masayuki - 2016
Persistent link: https://www.econbiz.de/10012125810
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The impact of uncertainty and certainty shocks
Schüler, Yves S. - 2020
real economic activity growth, in line with a risk shock. Conversely, a certainty shock (a shock strongly decreasing …
Persistent link: https://www.econbiz.de/10012180723