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The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims …
Persistent link: https://www.econbiz.de/10013098521
The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims …
Persistent link: https://www.econbiz.de/10013098766
precision parameter of the DP process is calibrated to the amount of trading activity in deep-out-of-the-money options. We use …
Persistent link: https://www.econbiz.de/10011506354
I develop a noisy rational expectations equilibrium model with a continuum of states and a full set of options that … have important implications for price discovery through options …
Persistent link: https://www.econbiz.de/10011296088
This paper provides empirical evidence that volatility markets are integrated through the time-varying term structure of variance risk premia. These risk premia predict the returns from selling volatility for different horizons, maturities, and products, including variance swaps, straddles, and...
Persistent link: https://www.econbiz.de/10011904683
announcements and use at-the-money options to exploit their informational advantage. In the post-event period, however, informed … option investors trade by using deep-out-of-the-money and out-of-the-money options. We documented limited evidence on the … volatility-motivated option trading, and our results suggest that this type of option trading could be motivated by hedging …
Persistent link: https://www.econbiz.de/10012818141
taking into account the relevance of pricing and hedging strategies for financial institutions …
Persistent link: https://www.econbiz.de/10013135698
exercising the options embedded in standard debt contracts. Extending substantially different loan terms or even rationing credit …
Persistent link: https://www.econbiz.de/10012963545
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of G-expectation and its corresponding G-Brownian motion...
Persistent link: https://www.econbiz.de/10008746123
In this paper, we consider hedging and pricing of illiquid options on an untradable underlying asset, where an … trading illiquid options, since the price shifts together with the liquidity costs affect the hedging performance. We set the … alternative instrument is used as a hedging instrument. We assume that the trade price of the hedging instrument is subject to …
Persistent link: https://www.econbiz.de/10013005775