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Did option prices predict the ERM crises?

Mizrach, Bruce Marshall - 1996

procedure. I parameterize the underlying exchange rate process as a mixture of log-normals, price the options using Monte Carlo …

Persistent link: https://www.econbiz.de/10011577049

Measuring the Market Risk of Freight Rates : A Forecast Combination Approach

Argyropoulos, Christos - 2015

This paper aims at contributing to the literature in three ways: First, we re-evaluate the performance of popular Value-at-Risk (VaR) estimation methods on freight rates amid the adverse economic consequences of the recent financial and sovereign debt crisis. Secondly we provide a detailed and...

Persistent link: https://www.econbiz.de/10013036001

Model Calibration with Neural Networks

Hernandez, Andres - 2016

A central consideration for the use of any pricing model is the ability to calibrate that model to market or historical prices. Whether the information needed by the model can be effectively implied from the data or not is one part of the calibration problem. However, in many applications, the...

Persistent link: https://www.econbiz.de/10012986486

Decomposed Higher-Moment Risk Premiums and Market Return Predictability

Dörries, Julian - 2021

In an empirical study of Standard & Poor's 500 index options, this paper analyses the predictability of future market …

Persistent link: https://www.econbiz.de/10013234246

A Prospect Theory Model for Predicting Cryptocurrency Returns

Thoma, Alexander - 2021

highly positively skewed. This skewness could be the reason why the cryptocurrency seems attractive to traders, similar to …

Persistent link: https://www.econbiz.de/10013242264

The Joint Cross Section of Option and Stock Returns Predictability with Big Data and Machine Learning

Goyenko, Ruslan; Zhang, Chengyu - 2021

Which market has leading informational advantage: stocks or options? Using large set of stock and option … predictors of options and stock returns. First, we find that options, rather than stock, characteristics are dominant predictors … of options returns. Second, options, rather than stock, characteristics are also dominant predictors of stock returns …

Persistent link: https://www.econbiz.de/10013244598

Predicting Commodity-Futures Basis Factor Return by Basis Spread

Kim, Daehwan - 2014

A growing body of literature confirms the significance of the commodity futures basis factor: It has a significantly positive premium and it explains the cross-section of commodity-futures excess returns. We extend the literature by documenting predictive relation between this factor and the...

Persistent link: https://www.econbiz.de/10013065562

Momentum and Reversion in Risk Neutral Martingale Probabilities

Madan, Dilip B. - 2014

A time homogeneous, purely discontinuous, parsimonous Markov martingale model is proposed for the risk neutral dynamics of equity forward prices. Transition probabilities are in the variance gamma class with spot dependent parameters. Markov chain approximations give access to option prices. The...

Persistent link: https://www.econbiz.de/10013064149

Option Return Predictability with Machine Learning and Big Data

Bali, Turan G.; Beckmeyer, Heiner; Mörke, Mathis; … - 2021

We investigate the cross-sectional return predictability of delta-hedged equity options using machine learning and big … long-short portfolios of equity options even after accounting for transaction costs. Although option-based characteristics …

Persistent link: https://www.econbiz.de/10013215503

The contribution of transaction costs to expected stock returns : a novel measure

Hiraki, Kazuhiro; Skiadopoulos, George - 2023

We document that a theoretically founded, real-time, and easy-to-implement option-based measure, termed synthetic-stock difference (SSD), accurately estimates the part of stock's expected return arising from stock's transaction costs. We calculate SSD for U.S. optionable stocks. SSD can be more...

Persistent link: https://www.econbiz.de/10014231634