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

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XVA of a Derivative on an Underlying Modelled by a Default Jump Process with an Analysis of CVA Wrong Way Risk for Bond Forwards 以违约跳跃过程为模型的基础衍生品的XVA &对债券远期CVA错误路径风险的分析
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2015-04-19 DOI: 10.2139/ssrn.2596884
M. Lichtner, Christian P. Fries
{"title":"XVA of a Derivative on an Underlying Modelled by a Default Jump Process with an Analysis of CVA Wrong Way Risk for Bond Forwards","authors":"M. Lichtner, Christian P. Fries","doi":"10.2139/ssrn.2596884","DOIUrl":"https://doi.org/10.2139/ssrn.2596884","url":null,"abstract":"We consider the valuation and risk management of derivatives on defaultable assets such as bonds taking into account funding (FVA), cash collateral, underlying default, counterparty default (CVA) and default correlation using joint default poisson process. The framework can be considered as an extension of the Black Scholes FVA/CVA framework of Bugard and Kjaer. The results are applied to bond forward contracts and total return swaps with early termination at underlying default.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"11 28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124241525","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}
引用次数: 0
Information Uncertainty, Volatility Term Structure and Index Option Returns 信息不确定性、波动率、期限结构与指数期权收益
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2015-04-08 DOI: 10.2139/ssrn.2591748
Cai Zhu
{"title":"Information Uncertainty, Volatility Term Structure and Index Option Returns","authors":"Cai Zhu","doi":"10.2139/ssrn.2591748","DOIUrl":"https://doi.org/10.2139/ssrn.2591748","url":null,"abstract":"In this paper, we explore the relation between information uncertainty and S&P 500 index option returns. Since underlying state variable affecting economy is unobservable, investors have to obtain their own estimations based on available information. During such procedure, it is inevitable that their results are contaminated by various kinds of noise signals. Therefore, investors cannot be 100% confident about the their estimations. We model such phenomena through incorporating investors’ learning behavior into an equilibrium stochastic volatility model. In the model, we introduce noise signals as a stochastic process independent with economic fundamentals. Such information uncertainty is able to generate time-varying volatility for stock returns, even when volatility of economic fundamental is constant. As a source of risk, for investors with recursive preference, it is priced and is able to explain variance premium and cross-section index option returns. In order to test the model implication, empirically, we construct several proxies for information uncertainty. Consistent with model intuition, we show that information uncertainty as a systematic risk factor is able to explain variance premium term structure and has better performance to explain cross-section index option returns than traditional symmetric risk factors such as volatility and jump.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-04-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124216735","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}
引用次数: 0
An Analysis of Volatility Spread via the Risk-Free Rate Proxy 基于无风险利率代理的波动价差分析
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2015-03-12 DOI: 10.2139/ssrn.2400872
L. Hin, N. Dokuchaev
{"title":"An Analysis of Volatility Spread via the Risk-Free Rate Proxy","authors":"L. Hin, N. Dokuchaev","doi":"10.2139/ssrn.2400872","DOIUrl":"https://doi.org/10.2139/ssrn.2400872","url":null,"abstract":"The paper studies estimation of implied volatility and the impact of the choice of the corresponding risk-free rate proxy. We suggest to analyze the implied volatility and the risk-free rate proxy inferred in conjunction from the observed option prices. We formulate and solve an overdefined system of nonlinear equations for the Black-Scholes model using options data. More precisely, we seek an optimal approximate solution via differential evolution, a stochastic optimization technique. Some experiments with historical prices reveals higher inferred risk-free rate than commonly used proxies. This leads to narrower volatility spread, or the difference between implied and realized volatilities.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128517810","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}
引用次数: 1
Forecasting Latent Volatility Through a Markov Chain Approximation Filter 利用马尔可夫链逼近滤波器预测潜在波动率
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2015-03-01 DOI: 10.2139/ssrn.2540514
C. Lo, K. Skindilias, Andreas S. Karathanasopoulos
{"title":"Forecasting Latent Volatility Through a Markov Chain Approximation Filter","authors":"C. Lo, K. Skindilias, Andreas S. Karathanasopoulos","doi":"10.2139/ssrn.2540514","DOIUrl":"https://doi.org/10.2139/ssrn.2540514","url":null,"abstract":"We propose a new methodology for filtering and forecasting the latent variance in a two-factor diffusion process with jumps from a continuous time perspective. For this purpose we use a continuous time Markov chain approximation with a finite state space. Essentially, we extend Markov chain filters to processes of higher dimensions. We assess forecastability of the models under consideration by measuring forecast error of model expected realised variance, trading in variance swap contracts, producing Value-at-Risk estimates as well as examining sign forecastability. We provide empirical evidence using two sources, the S&P500 index values and its corresponding cumulative risk-neutral expected variance (namely the VIX index). Joint estimation reveals the market prices of equity and variance risk implicit by the two probability measures. A further simulation study shows that the proposed methodology can filter the variance of virtually any type of diffusion process (coupled with a jump process) with non-analytical density function.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130108371","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}
引用次数: 10
Option-Based Credit Spreads 期权信用利差
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-12-01 DOI: 10.2139/ssrn.2538876
Christopher L. Culp, P. Veronesi
{"title":"Option-Based Credit Spreads","authors":"Christopher L. Culp, P. Veronesi","doi":"10.2139/ssrn.2538876","DOIUrl":"https://doi.org/10.2139/ssrn.2538876","url":null,"abstract":"We present a novel empirical benchmark for analyzing credit risk using “pseudo firms” that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo-firm assets. Empirically, like corporate spreads, pseudo-bond spreads are large, countercyclical, and predict lower economic growth. Using this framework, we find that bond market illiquidity, investors’ over-estimation of default risks, and corporate frictions do not seem to explain excessive observed credit spreads, but, instead, a risk premium for tail and idiosyncratic asset risks is the primary determinant of corporate spreads.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129895980","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}
引用次数: 79
Counterparty Risk Reduction by the Optimal Netting of OTC Derivatives OTC衍生品的最优净值降低交易对手风险
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-11-24 DOI: 10.2139/ssrn.2529956
D. O'Kane
{"title":"Counterparty Risk Reduction by the Optimal Netting of OTC Derivatives","authors":"D. O'Kane","doi":"10.2139/ssrn.2529956","DOIUrl":"https://doi.org/10.2139/ssrn.2529956","url":null,"abstract":"The netting of OTC derivatives trades, known as 'compression', reduces systemic risk in financial markets by minimising counterparty exposures between large financial institutions, in particular the large dealer banks. We present here a framework for compression in the OTC derivatives market for interest rate swaps. We minimise the total net counterparty exposure by partially or fully unwinding existing swap trades and determine the degree of compression obtained as a function of the number of trades, the number of participating parties and the number of risk constraints. We do this using both linear programming (LP) and quadratic programming (QP) approaches. We are able to separately quantify the benefit of bilateral and multilateral netting. We also compare the tendency of both LP and QP approaches to favour full unwinds of existing trades versus partial unwinds. We calculate the performance of both optimisation approaches by calculating their average reduction in counterparty risk by simulating over large numbers of randomly generated trade sets. We show that significant compression can be achieved, and find that LP approaches are preferable as they are generally computationally faster and produce solutions with more full unwinds than QP approaches.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122629807","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}
引用次数: 0
Stochastic String Models with Continuous Semimartingales 具有连续半鞅的随机弦模型
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-11-06 DOI: 10.2139/ssrn.2438601
Alberto Bueno-Guerrero, Manuel Moreno, Javier F. Navas
{"title":"Stochastic String Models with Continuous Semimartingales","authors":"Alberto Bueno-Guerrero, Manuel Moreno, Javier F. Navas","doi":"10.2139/ssrn.2438601","DOIUrl":"https://doi.org/10.2139/ssrn.2438601","url":null,"abstract":"This paper reformulates the stochastic string model of Santa-Clara and Sornette using stochastic calculus with continuous semimartingales. We present some new results, such as: (a) the dynamics of the short-term interest rate, (b) the PDE that must be satisfied by the bond price, and (c) an analytic expression for the price of a European bond call option. Additionally, we clarify some important features of the stochastic string model and show its relevance to price derivatives and the equivalence with an infinite dimensional HJM model to price European options.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127820045","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}
引用次数: 14
An Improved Method for Pricing and Hedging American Options 一种改进的美式期权定价和套期保值方法
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-10-24 DOI: 10.2139/ssrn.2514504
Tommaso Paletta, Silvia Stanescu, R. Tunaru
{"title":"An Improved Method for Pricing and Hedging American Options","authors":"Tommaso Paletta, Silvia Stanescu, R. Tunaru","doi":"10.2139/ssrn.2514504","DOIUrl":"https://doi.org/10.2139/ssrn.2514504","url":null,"abstract":"The majority of quasi-analytic pricing methods for American options are efficient near-maturity but are prone to larger errors when time-to-maturity increases. A new methodology, called the \"extension\"-method, is introduced to increase the accuracy of almost any existing quasi-analytic approach in pricing long-maturity American options. It relies on an approximation of the optimal exercise price near the beginning of the contract combined with existing pricing approaches so that the maturity range for which small errors are attainable is extended. The new methodology retains the quasi-analytic nature of the methods it improves on and we derive generic quasi-analytic formulae for the price of an American put as well as for its delta parameter. Our numerical study indicates that the proposed methodology considerably improves both the pricing and the hedging performance of a number of established approaches for a wide range of maturities. Furthermore, the pricing improvements are most sizeable at longer maturities, where existing approaches do not perform well.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125840434","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}
引用次数: 0
The Impact of a Premium Based Tick Size on Equity Option Liquidity 基于溢价的点对股票期权流动性的影响
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-09-21 DOI: 10.2139/ssrn.2499132
Thanos Verousis, Owain ap Gwilym, Nikolaos Voukelatos
{"title":"The Impact of a Premium Based Tick Size on Equity Option Liquidity","authors":"Thanos Verousis, Owain ap Gwilym, Nikolaos Voukelatos","doi":"10.2139/ssrn.2499132","DOIUrl":"https://doi.org/10.2139/ssrn.2499132","url":null,"abstract":"On June 2, 2009, NYSE LIFFE Amsterdam reduced the tick size for options trading at prices below € 0.20 from € 0.05 to € 0.01 and on April 1, 2010, the exchange increased the price threshold to € 0.50. We study the effect of that tick size reduction on the liquidity of individual equity options. In this respect, this study is uniquely positioned in the options context where moneyness is a clear additional factor in the implementation of the tick size changes. We show that, in general, quoted and traded option liquidity increased but at a rate decreasing with option moneyness. Real costs fell more for the lower priced contracts. Importantly, we show that the ability of the market to absorb larger trades has potentially diminished after the change in the tick size. We document a substantial increase in quote revisions which implies an increase in price competition and, as a result, an improvement in market quality. Finally, the decrease in the tick size led to an increase in hedging activity using deep‐out‐of‐the‐money puts. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:397–417, 2016","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129114711","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}
引用次数: 3
The CEV Model Revisited 重新审视CEV模型
ERN: Other Econometric Modeling: Derivatives (Topic) Pub Date : 2014-09-03 DOI: 10.2139/ssrn.2487669
Wen Cheng, Tianyou Zhang
{"title":"The CEV Model Revisited","authors":"Wen Cheng, Tianyou Zhang","doi":"10.2139/ssrn.2487669","DOIUrl":"https://doi.org/10.2139/ssrn.2487669","url":null,"abstract":"This note introduces a mathematically rigorous short time approximation of the transition density function of the CEV model. We first apply a change of variable to the CEV operator and transform it to a Schrodinger operator with an inverse square potential, and then construct a Neumann series to the new opeator under weighted Sobolev spaces. To the author’s knowledge, this is the first time that a mathematically rigorous construction for the CEV model is obtained in the financial mathematics literature.","PeriodicalId":177064,"journal":{"name":"ERN: Other Econometric Modeling: Derivatives (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121366982","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}
引用次数: 1
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