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Application of stochastic optimal control to financial market debt crises
Stein, Jerome L. - 2009
This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...
Persistent link: https://www.econbiz.de/10003807893
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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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Can the variance after-effect distort stock returns?
Berrada, Tony - 2021
predictive variance. We show theoretically how this adjustment factor affects both average and volatility of excess returns. We … related to excess volatility as predicted by the model. Further confirming the model's implications, we also show how stock …
Persistent link: https://www.econbiz.de/10012487731
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Information and inventories in high-frequency trading
Muhle-Karbe, Johannes; Webster, Kevin - 2015
We study how short-term informational advantages can be monetized in a high-frequency setting, when large inventories are explicitly penalized. We find that if most of the additional information is revealed regardless of the high-frequency traders' actions, then fast inventory management allows...
Persistent link: https://www.econbiz.de/10011412266
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Estimating the volatility of asset pricing factors
Becker, Janis; Leschinski, Christian - 2018 - This version: May 20, 2018
allocation and risk management require estimates of the volatility of these factors. While realized volatility has become a … provide a statistical approach to estimate the volatility of these factors. The efficacy of this approach relative to the use … of models based on squared returns is demonstrated for forecasts of the market volatility and a portfolio allocation …
Persistent link: https://www.econbiz.de/10011860248
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Price impact and portfolio impact
Cvitanić, Jakša; Malamud, Semyon - 2010
We study survival, price impact and portfolio impact in heterogeneous economies. We show that, under the equilibrium risk-neutral measure, long-run price impact is in fact equivalent to survival, whereas longrun portfolio impact is equivalent to survival under an agent-specific, wealth-forward...
Persistent link: https://www.econbiz.de/10003979998
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Option-implied information and predictability of extreme returns
Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013
We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...
Persistent link: https://www.econbiz.de/10010226098
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Asset pricing with arbitrage activity
Hugonnier, Julien; Prieto, Rodolfo - 2013
agents, arbitrage activity has an impact on the price level and generates both excess volatility and the leverage effect. We …
Persistent link: https://www.econbiz.de/10010257492
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The factor-spline-GARCH model for high and low frequency correlations
Rangel, Jose Gonzalo; Engle, Robert F. - 2009
frequency volatilities and correlations ; Dynamic conditional correlation ; Spline-GARCH ; Idiosyncratic volatility ; Long …
Persistent link: https://www.econbiz.de/10003821063
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A jumping index of jumping stocks? : an MCMC analysis of continuous-time models for individual stocks
Pollastri, Alessandro; Rodrigues, Paulo Jorge Maurício; … - 2022 - This version: December 6, 2022
This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it...
Persistent link: https://www.econbiz.de/10013465942