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Standard Deviation or Variance : The Better Proxy for Large Hedgers and Large Speculators Risk in U.S. Futures Markets

Gurrib, Ikhlaas - 2013

&P500 futures have experienced increasing volatility persistence to shocks over the 1990s. In all remaining markets, hedgers … most futures returns in the 29 US markets were leptokurtic …

Persistent link: https://www.econbiz.de/10013073757

The pitfalls of central clearing in the presence of systematic risk

Kubitza, Christian; Pelizzon, Loriana; Getmansky, Mila - 2018

Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding of the benefits and potential pitfalls with respect...

Persistent link: https://www.econbiz.de/10011923506

Options and Risk

Bruno, Giovanni - 2020

We propose a parsimonious general equilibrium extension of the Black-Scholes economy that helps clarify how options' prices, expected returns, risk exposure, and optimal exercise policies respond to variations in the risk exposure of the underlying asset. The model allows one to separate the...

Persistent link: https://www.econbiz.de/10012830325

Option Pricing in an Investment Risk-Return Setting

Kim, Young Shin - 2019

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We...

Persistent link: https://www.econbiz.de/10012865720

Basis Risk When Hedging a Global Credit Portfolio

Chamizo, Alvaro - 2017

The calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is usually rather unstable due to the volatility of CDS spreads. Since credit derivatives on single names are not very liquid, the implied adjustments in capital charges could be...

Persistent link: https://www.econbiz.de/10012944310

Hedging Market Risk and Volatility : Evidence from Indian Options Market

Thomas, Sony - 2015

The paper examines the performance of various hedging strategies using Options in the Indian options market. The entire spectrum of option hedging strategies are divided into two categories: 1) Strategies with limited losses and unlimited gains; 2) Strategies with limited losses and limited...

Persistent link: https://www.econbiz.de/10013025217

Synthetic CDO Pricing : The Perspective of Risk Integration

Hu, Conghui - 2015

The underlying asset pool of collateral debt obligations (CDOs) simultaneously encompasses credit risk and market risk. However, the standard CDO pricing model not only underestimates the risk to the asset pool due to a poor description of the correlation structure among obligors but is also...

Persistent link: https://www.econbiz.de/10013013661

ETD vs. OTCD : Counterparty Risk and Capital Requirements for Exchange Traded Derivatives

Bianchetti, Marco - 2018

It is common belief that Exchange Traded Derivatives (ETDs), e.g. Futures and Futures Options, are collateralized plain …

Persistent link: https://www.econbiz.de/10012937762

The VIX Premium

Cheng, Ing-Haw - 2018

Ex-ante estimates of the volatility premium embedded in VIX futures, known as the VIX premium, fall or stay flat when …-post returns to VIX futures with a coefficient near one, and 2) Falling ex-ante premiums predict increasing ex-post market and … investment risk, creating profitable trading opportunities. Falling hedging demand helps explain this behavior, as premiums and …

Persistent link: https://www.econbiz.de/10012937777

Basis Risk in Hedging a CDS Portfolio with Credit Indices

Chamizo, Alvaro - 2017

The financial crisis has raised concerns throughout the industry on the possibility that hedging credit valuation adjustment (CVA) might become increasingly difficult should the long-standing correlation between singlename and index CDS products break down. So, we provide an estimation of the...

Persistent link: https://www.econbiz.de/10012970402