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Portfolio Management Framework for Derivative Instruments
Vorobets, Anton - 2022
The investment industry lacks an unified framework for handling derivative instruments in general portfolio management. With the increased use of derivatives, there is a need for a framework that aligns fundamental terminology and concepts. The main challenges with the current practices are...
Persistent link: https://www.econbiz.de/10014236873
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On the Approximation of the Black and Scholes Call Function
Orlando, Giuseppe - 2020
approximating formula for the Black and Scholes call function that can be useful for deriving the risk of options i.e. the implied … moneyness …
Persistent link: https://www.econbiz.de/10012823891
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Feel the Market : An Attempt to Identify Additional Factor in the Capital Asset Pricing Model (CAPM) Using Generative Pre-Trained Transformer (GPT) and Bidirectional Encoder Repres...
Zhang, Christopher L. - 2023
In the past year, generative AI, led by Chat GPT by Open AI and Bard, a language experiment by Google, generated tremendous attention amongst the public. Their impact on finance, law and general productivity are difficulty to articulate with words. This paper aims to strengthen the...
Persistent link: https://www.econbiz.de/10014352641
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Cash sub-additive risk measures and interest rate ambiguity
El Karoui, Nicole; Ravanelli, Claudia - 2008
A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub-additive axiom to preserve the original difference between the numeraire of...
Persistent link: https://www.econbiz.de/10003961489
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Quantile hedging
Föllmer, Hans; Leukert, Peter - 1998
In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...
Persistent link: https://www.econbiz.de/10009574876
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Efficient hedging : cost versus shortfall risk
Föllmer, Hans; Leukert, Peter - 1999
An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often quite expensive, we study partial hedges, which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal...
Persistent link: https://www.econbiz.de/10009579176
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Illiquidity transmission from spot to futures markets
Korn, Olaf; Krischak, Paolo; Theissen, Erik - 2014
We develop a model of the illiquidity transmission from spot to futures markets that formalizes the derivative hedge theory proposed by Cho and Engle (1999). The model shows that spot market illiquidity does not translate one-to-one to the futures market, but rather interacts with price risk,...
Persistent link: https://www.econbiz.de/10010399342
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Individual investors and suboptimal early exercises in the fixed-income market
Eickholt, Mathias; Entrop, Oliver; Wilkens, Marco - 2014
This paper is the first to analyze and value early exercises of Individual Investors in fixed-income investment products. Assuming decision and transaction costs we consider that a continuous decision-making on holding or exercising is not optimal anymore and propose a new approach to modeling...
Persistent link: https://www.econbiz.de/10010412103
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Arbitrage-free models of stocks and bonds
Durham, J. Benson - 2013
A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...
Persistent link: https://www.econbiz.de/10010222892
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The Puzzle of Privately-Imposed Price Limits : Are the Limits Imposed by Financial Exchanges Effective
Buyuksahin, Bahattin - 2011
futures market, the associated (but unrestricted) options market becomes the price discovery market: much of the trading that … would have occurred on the futures market migrates to the options market, and options prices accurately predict the … (unconstrained) futures price the next day. We also show that the presence of options mitigates the effect of price limits on …
Persistent link: https://www.econbiz.de/10013131781