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Inflation Effect on Value Calculation of Asian Real Option
Trifonov, Yuriy - 2013
This paper establishes a degree of influence between an inflation rate and a risk-free investment rate on the precision … inflation rate beyond profitability of risk-free investments, which is typical for Russia, an option valuation in a trinomial …
Persistent link: https://www.econbiz.de/10013071532
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A Local Volatility Model to Price and Calibrate Year-on-Year and Zero-Coupon Inflation Options
Ribeiro, Diana - 2013
-coupon inflation options. This model provides an exact fit to year-on-year implied volatilities and to year-on-year forward convexity … model primitive is the year-on-year inflation ratio, which follows an exponential mean reverting process. The pricing of … ensures that the model hits the market inflation index forward curve. The model is then extended to price and calibrate zero …
Persistent link: https://www.econbiz.de/10013079397
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Coherent CVA and FVA with Liability Side Pricing of Derivatives
Lou, Wujiang - 2018
This article presents the liability-side pricing model of uncollateralized derivatives. In an extension to the risk-neutral pricing formula, the fair value is obtained by discounting the payoff at the liability-side's senior unsecured debt interest rates. The price difference from the default...
Persistent link: https://www.econbiz.de/10012937927
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A new predictor of real economic activity : the S&P 500 option implied risk aversion
Sarantopoulou-Chiourea, Sylvia; Skiadopoulos, George - 2015 - This draft: 17 March 2015
We propose a new predictor of real economic activity (REA), namely the representative investor's implied relative risk aversion (IRRA) extracted from S&P 500 option prices. IRRA exploits the forward-looking information in option prices. It increases as risk averse investors enter the market,...
Persistent link: https://www.econbiz.de/10010499597
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Tractable rare disaster probability and options-pricing
Barro, Robert J.; Liao, Gordon Y. - 2019
We derive an option-pricing formula from recursive preference and estimate rare disaster probability. The new options-pricing formula applies to far-out-of-the money put options on the stock market when disaster risk dominates, the size distribution of disasters follows a power law, and the...
Persistent link: https://www.econbiz.de/10012182396
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A new predictor of U.S. real economic activity : the S&P 500 option implied risk aversion
Faccini, Renato; Konstantinidi, Eirini; Skiadopoulos, George - 2018
We propose a new predictor of U.S. real economic activity (REA), namely the representative investor's implied relative risk aversion (IRRA) extracted from S&P 500 option prices. IRRA is forward-looking and hence, it is expected to be related to future economic conditions. We document that U.S....
Persistent link: https://www.econbiz.de/10011787902
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Extracting implicit density functions from short term interest rate options
Nielsen, Hannah - 2001
Using option prices the expectations of the market participants concerning the underlying asset can be extracted as well as the uncertainty surrounding these expectations. In this paper a mixture of lognormal density functions will be assumed to analyze options on three-month Euribor futures for...
Persistent link: https://www.econbiz.de/10009614294
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What option prices tell us about the ECB's unconventional monetary policies
Olijslagers, Stan; Petersen, Annelie; Vette, Nander de; … - 2018
We use a series of different approaches to extract information about crash risk from option prices for the Euro-Dollar exchange rate, with each step sharpening the focus on extracting more specific measures of crash risk around dates of ECB measures of Unconventional Monetary Policy. Several...
Persistent link: https://www.econbiz.de/10011940034
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Distorting Arrow-Debreu Securities : New Entropy Restrictions Implied by the Option Cross Section
Chabi-Yo, Fousseni - 2020
Replacing equity return (as in the equity risk premium) with returns on an arbitrary contingent claim, we obtain a new class of economic risk premiums to impose upon candidate models. These risk premiums reflect the distance between the physical and risk-neutral moments for asset returns, can be...
Persistent link: https://www.econbiz.de/10012844094
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What Option Prices Tell Us About the ECB’s Unconventional Monetary Policies
Olijslagers, Stan - 2019
We use a series of different approaches to extract information about crash risk from option prices for the Euro-Dollar exchange rate, with each step sharpening the focus on extracting more specific measures of crash risk around dates of ECB measures of Unconventional Monetary Policy. Several...
Persistent link: https://www.econbiz.de/10012888949