ERN: Other Econometric Modeling: Derivatives (Topic)最新文献

{"title":"The Theoretical Price of a Share-Based Payment With Performance Conditions and Implications for the Current Accounting Standards","authors":"M. Fujimoto","doi":"10.2139/ssrn.3199849","DOIUrl":"https://doi.org/10.2139/ssrn.3199849","url":null,"abstract":"Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for share-based payments issued in 2004 have had many problems. This paper develops a theoretical SPPC price model with a framework for a marginal utility-based price, which previous studies proposed is the price of contingent claims in an incomplete market. This paper's contribution is fivefold. First, we restricted the stochastic process to a certain class to demonstrate how to consistently change all variables' probability distributions, which affect the SPPC payoff. Second, we explicitly indicated not only the stochastic processes of the stock price process and performance variables under the changed probability, but also how the changes in the performance variables' drift coefficients related to stock betas. Third, we proposed a convenient model in application that uses only a few parameters. Fourth, we provided a method to estimate the parameters and improve the estimation of both the price and parameters. Fifth, we illustrated the problems in current accounting standards and indicated how the theoretical price model can significantly improve them.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126039689","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Clearing of Euro OTC Derivatives Post Brexit – Why a Uniform Regulation and Supervision of CCPs Is Essential for European Financial Stability","authors":"Volker Brühl","doi":"10.2139/SSRN.3187329","DOIUrl":"https://doi.org/10.2139/SSRN.3187329","url":null,"abstract":"With a notional amount outstanding of more than USD 500 trillion, the market for OTC derivatives is of vital importance for global financial stability. A growing proportion of these contracts are cleared via central counterparties (CCPs), which means that CCPs are gaining in importance as critical financial market infrastructures. At the same time, there is growing concern that a new \"too big to fail\" problem could arise, as the CCP industry is highly concentrated due to economies of scale. From a European perspective, it should be noted that the clearing of euro-denominated OTC derivatives mainly takes place in London, hence outside the EU in the foreseeable future. For some time there has been a controversial discussion as to whether this can remain the case post Brexit. CCPs, which clear a significant proportion of euro OTC derivatives and are systemically relevant from an EU perspective, should be subject to direct supervision by EU authorities and should be established in the EU. This would represent an important building block for a future Capital Markets Union in Europe, as regulatory or supervisory arbitrage in favour of systemically important third-country CCPs could be prevented. In addition, if a systemically relevant CCP handling a considerable portion of the euro OTC derivatives business were to run into serious difficulties, this may impact ECB monetary policy. This applies both to demand for central bank money and to the transmission of monetary policy measures, which can be significantly impaired, particularly in the event that the repo market or payment systems are disrupted. It is therefore essential for the ECB to be closely involved in the supervision of CCPs. Against this background, the draft amendment of EMIR (European Market Infrastructure Regulation) presented on 13 June 2017 is a step in the right direction. In addition, there is an urgent need to introduce a recovery and resolution mechanism for CCPs in the EU to complement the existing single resolution mechanism (SRM) for banks in the eurozone. Only then can the diverse interdependencies between banks and CCPs be adequately taken into account in the recovery and resolution programmes required in a financial crisis.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116000236","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Efficient Long-Dated Swaption Volatility Approximation in the Forward-LIBOR Model","authors":"Jacques van Appel, Thomas Andrew McWalter","doi":"10.2139/ssrn.2968616","DOIUrl":"https://doi.org/10.2139/ssrn.2968616","url":null,"abstract":"We provide efficient swaption volatility approximations for longer maturities and tenors under the lognormal forward-LIBOR model (LFM). In particular, we approximate the swaption volatility with a mean update of the spanning forward rates. Since the joint distribution of the forward rates is not known under a typical pricing measure, we resort to numerical discretization techniques. More specifically, we approximate the mean forward rates with a multi-dimensional weak order 2.0 Itō–Taylor scheme. The higher-order terms allow us to more accurately capture the state dependence in the drift terms and compute conditional expectations with second-order accuracy. We test our approximations for longer maturities and tenors using a quasi-Monte Carlo (QMC) study and find them to be substantially more effective when compared to the existing approximations, particularly for calibration purposes.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"48 8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132756281","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Exploration Activity, Long-Run Decisions, and the Risk Premium in Energy Futures","authors":"A. David","doi":"10.2139/ssrn.2672490","DOIUrl":"https://doi.org/10.2139/ssrn.2672490","url":null,"abstract":"We present evidence that the capital stock of firms in oil and gas exploration as well as oil inventories are each positively related to the slope of the futures curve, and negatively predict returns on holding crude oil futures contracts. We build an equilibrium model of resource extraction, exploration, and storage with these features. Capital lowers extraction costs as firms drill in increasingly expensive fields, while inventory helps smooth fluctuations in demand and extraction. The model sheds light on the role of declining well quality on the recent positive trend of real oil prices, and the peaking of consumption.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127799493","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Effect of Central Clearing on Counterparty Risk, Liquidity and Other Determinants of Corporate Credit Default Swaps","authors":"Josephine Molleyres","doi":"10.2139/ssrn.3248958","DOIUrl":"https://doi.org/10.2139/ssrn.3248958","url":null,"abstract":"Over-the-counter (OTC) trades are connected with a large amount of uncertainty regarding liquidity and counterparty risk. This paper shows that the recent implementation of regulated central counterparty clearing houses (CCPs) in the Credit Default Swaps (CDS) market reduces the impact of counterparty risk and liquidity on single name corporate CDS spreads listed in the S&P500. The results show evidence for the efficient risk management of CCPs and that transparency is increased in the CDS market. CDS spreads are determined by firm-specific and global factors. \u0000The determinants of CDS spreads are dependent on whether they are traded OTC or centrally. Using a novel technique to measure equity price fluctuations from high-frequency data show that the firm-specific stock market determines CDS spreads much stronger when CDS are traded OTC than when they are centrally cleared. Equity log-returns have a significant negative impact on CDS spreads, whereas equity volatility is positively related. The significant negative effect of the market-wide stock market climate on CDS spreads is independent of the trading place. The term spread has a negative effect and the market wide volatility a positive deterministic potential on CDS spreads only when they are traded OTC, whereas there is no effect when CDS spreads are centrally cleared. Interestingly, OTC traded CDS spreads are much better explained than centrally cleared ones.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131910368","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"CDS Option Valuation with Double-Exponential Jumps","authors":"R. Bhar, Nedim Handzic","doi":"10.2139/ssrn.3117910","DOIUrl":"https://doi.org/10.2139/ssrn.3117910","url":null,"abstract":"We demonstrate how the Double-Exponential Jump-Diffusion (DEJD) process can be used to value iTraxx CDS options based on historical returns of the underlying CDS index. In the first step we find Maximum Likelihood estimates for the volatility of the normal component of returns and the Poisson frequencies and mean sizes of upward and downward exponential jumps. In results similar to Ramezani and Zeng’s (2006) application of DEJD to equities, we find that the DEJD provides a better fit than either a normal or single-jump specification. We take the additional step of using parameter estimates as inputs to the semi-closed European option pricing formula proposed by Kou (2002) under DEJD. We compare the model and market option prices across strikes and find that both the level and shape of the implied volatility smile match closely. Our findings suggest that the DEJD provides a realistic description of the joint role of positive and negative economic surprises in credit markets. In addition, the use of Maximum Likelihood with the option pricing model is a practical way to analyse divergence between realised and market-implied distributions of credit returns, and can be used to check pricing.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126150799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Simple Analysis is Never a Solution in Valuing Complex Derivative Securities","authors":"Scott Hakala","doi":"10.2139/ssrn.3087998","DOIUrl":"https://doi.org/10.2139/ssrn.3087998","url":null,"abstract":"The valuation of complex derivative securities (options, warrants, and conversion elements with a variety of features) within these companies has evolved from a niche academic pursuit into a widespread practice and is often required for tax, financial accounting, reporting fair values, or for management purposes. Sadly, many valuation analysts resort to simplified or “canned” models and assumptions that are inappropriate for valuing contemporary derivative securities: employing inappropriate volatility assumptions; using inappropriate models or formulas; and/or ignoring the interactions between the values of various outstanding securities and dilutive securities within a company’s capital structure as the value of the company changes over time. Three important considerations demand the use of more sophisticated valuation modeling: unknown potential corporate volatility, leverage & related default risk, and multiple securities within a single corporate entity.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121075640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Financial Density Forecasts: A Comprehensive Comparison of Risk-Neutral and Historical Schemes","authors":"Ricardo Crisóstomo, L. Couso","doi":"10.2139/ssrn.3034270","DOIUrl":"https://doi.org/10.2139/ssrn.3034270","url":null,"abstract":"We investigate the forecasting ability of the most commonly used benchmarks in financial economics. We approach the usual caveats of probabilistic forecasts studies -small samples, limited models and non-holistic validations- by performing a comprehensive comparison of 15 predictive schemes during a time period of over 21 years. All densities are evaluated in terms of their statistical consistency, local accuracy and forecasting errors. Using a new indicator, the Integrated Forecast Score (IFS), we show that risk-neutral densities outperform historical-based predictions in terms of information content. We find that the Variance Gamma model generates the highest out-of-sample likelihood of observed prices and the lowest predictive errors, whereas the ARCH-based GRJ-FHS delivers the most consistent forecasts across the entire density range. In contrast, lognormal densities, the Heston model or the Breeden-Litzenberger formula yield biased predictions and are rejected in statistical tests.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133201652","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Clearing of Euro OTC Derivatives Post Brexit - An Analysis of the Present Cost Estimates","authors":"Volker Brühl","doi":"10.2139/SSRN.3098932","DOIUrl":"https://doi.org/10.2139/SSRN.3098932","url":null,"abstract":"In the context of the upcoming Brexit, a relocation of the clearing of euro-OTC derivatives for EU-based firms is the subject of controversial discussion. The opponents of a relocation argue that a relocation would cause additional costs for market participants of up to USD 100 bn over a period of 5 years. This paper shows that this cost estimate is fairly unrealistic and that relocation costs would amount to approximately USD 0.6 bn p.a., which translates to cumulative costs of around USD 3.2 bn for a transition period of 5 years. In light of the strategic importance of systemically relevant CCPs for the financial stability of the eurozone, the potential relocation costs should not be a decision criterion.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"72 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122567801","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Determinants of Implied Volatility Smiles - An Empirical Analysis Using Intraday DAX Equity Options","authors":"A. Rathgeber, J. Stadler, Markus Ulze","doi":"10.2139/ssrn.3071629","DOIUrl":"https://doi.org/10.2139/ssrn.3071629","url":null,"abstract":"By extending and reviewing determinants of the implied volatility in the context of high frequency (HF) trade-by-trade DAX equity options from the EUREX a mean-reversion autocorrelation process is revealed, besides confirming low frequency results such as moneyness, time, liquidity, volume and underlying moment dependencies. Furthermore, we show, that the mean-reversion process is present, even if we control for fluctuating trades between bid and ask prices. It is induced by algorithmic market making and market microstructure effects. We address the HF research gap in market microstructure literature expressed by O’Hara (2015), who argues that markets and trading is radically different today, which consequently altered the basic constructs of market microstructure, and we give additional explanation for the flickering quote hypothesis of Hasbrouck and Saar (2009).","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131358320","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}