Jurnal Derivat最新文献

{"title":"Improving and Extending the Wu-Zhu Static Hedge","authors":"Shuxin Guo, Qiang Liu","doi":"10.3905/jod.2022.1.173","DOIUrl":"https://doi.org/10.3905/jod.2022.1.173","url":null,"abstract":"Without considering the underlying risk dynamics and jumps, Wu and Zhu (2016) recently proposed an ingenious approach of hedging options statically with an option portfolio. We improve their scheme in three ways. First, we theoretically make the Wu-Zhu approach more accurate by utilizing the Black-Scholes-Merton dual equation. Second, we propose a better error measure, the so-called “true hedge error,” that takes the initial cost of the hedge into consideration. Finally, we suggest two measures of percentage hedge errors to assess hedge performance more precisely. With extensive simulations under both the Black-Scholes-Merton and Heston models, we show that our proposal significantly improves the hedge performance, especially for in-the-money and at-the-money options. Importantly, we extend Wu-Zhu to options with a payoff of homogeneous of degree one.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"26 - 41"},"PeriodicalIF":0.0,"publicationDate":"2022-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46643757","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":"Sector Option Correlation Premiums and Predictable Changes in Implied Volatility","authors":"Apoorva Koticha, Chen Li, Joseph M. Marks","doi":"10.3905/jod.2022.1.171","DOIUrl":"https://doi.org/10.3905/jod.2022.1.171","url":null,"abstract":"We examine options listed on sector ETFs that constitute the S&P 500 and find evidence of predictability in implied volatilities associated with abnormally high or low implied correlations. We show that sector-implied volatilities evolve to maintain stable relations between sector correlation premiums and the correlation premium on the S&P 500, allowing the calculation of a sector-specific, idiosyncratic correlation premium. The sector-specific correlation premium is a more reliable signal of future changes in sector-implied volatility relative to simple level measures of the volatility or correlation premiums due to its focus on correlation rather than volatility, and its adjustment for aggregate levels. Moreover, we find that one-day reversals in sector-implied volatilities are related only to reversals in the sector-specific correlation premium, and that information extracted from stock-implied volatilities has little or no predictive ability for sector-implied volatility. The predictable variation in sector-implied volatilities associated with the sector-specific component of the correlation premium forms the basis for profitable trading signals that dominate strategies based directly on sector volatility premiums.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"84 - 115"},"PeriodicalIF":0.0,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49309790","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":"Editor’s Letter","authors":"Joseph M. Pimbley","doi":"10.3905/jod.2022.30.1.001","DOIUrl":"https://doi.org/10.3905/jod.2022.30.1.001","url":null,"abstract":"","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"1 - 3"},"PeriodicalIF":0.0,"publicationDate":"2022-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43122520","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":"On the Term Structure of VIX Futures’ Implied Convexity","authors":"D. Annis, D. Abasto","doi":"10.3905/jod.2022.1.170","DOIUrl":"https://doi.org/10.3905/jod.2022.1.170","url":null,"abstract":"Before the global equity crash in October 1987, volatility could be reasonably approximated as a constant, consistent with Black-Scholes (1973) dynamics. Thereafter, a stylized feature of equity options markets is that both single-name and index options have exhibited consistent, regular deviations of volatility in both strike and maturity. The resulting volatility surface has been studied extensively (Rubinstein 1994, Jackwerth and Rubinstein 1996, Derman 1999, Cont and da Fonseca 2002, Gatheral 2006). Moreover, reduced-form representations of major equity indices’ volatility surfaces corresponding to “average” volatility (over strikes) accumulated through fixed maturities, for example, Cboe’s (formerly Chicago Board Options Exchange) Volatility Index (VIX), have been popularized as gauges of investor sentiment and risk-aversion. Likewise, there has been considerable interest in quantifying and interpreting the term structure of futures whose payoffs are tied to these indices (Zhu and Zhang 2007; Lu and Zhu 2009; Egloff et al. 2010). In the context of the risk-neutral distribution characterizing asset prices at contract maturity, these studies focus on futures’ expectations—their first moments; higher-order moments are less well-studied. Daigler et al. (2016) introduce implied convexity as a measure of variance, that is, the second moment. However, although many authors have studied the term structure of VIX futures’ expectations, to our knowledge, none has examined the term structure of their variances. This article extends the research of Daigler et al. in two important ways. First, it provides an alternative to their intermediate adjustments of the VIX near-term (VIN) and VIX far-term (VIF) component indices that is consistent with the assumptions underlying the calculation of all Cboe volatility indices. It is likewise consistent with volatility indices in foreign markets, for example, the Euro STOXX 50 Volatility (VSTOXX) index (Deutsche Börse Group 2022). Second, it characterizes the entire term structure of VIX futures’ second moments, rather than that of a single contract with a maturity of approximately one month. Additionally, we quantify the differences arising from various interpolation choices. We find that extrapolation based only on two maturities near thirty calendar days produces estimates of variance that differ considerably from interpolations based on all available expiries. Furthermore, the accuracy of extrapolation degrades as the absolute differences between a contract’s maturity and the maturities of the interpolants increase.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"10 - 25"},"PeriodicalIF":0.0,"publicationDate":"2022-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47364373","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":"Which Factors Play a Role in CoCo Issuance? Evidence from European Banks","authors":"Sara Wagner, Theo Vermaelen, Christian C. P. Wolff","doi":"10.3905/jod.2022.1.169","DOIUrl":"https://doi.org/10.3905/jod.2022.1.169","url":null,"abstract":"This article explores the reasons why some banks issue Contingent Convertible (CoCo) bonds, but others do not. To this end, we use a binary logistic model and control for the determinants suggested by the literature. Our findings suggest that larger banks and those with higher Tier 1 capital, higher net loans, higher wholesale funding, lower levels of leverage, and lower risk-weighted assets have a higher tendency to issue CoCos and were the early adopters of this novel financing instrument. Our results also suggest that banks in countries with higher annual growth rate of GDP per capita and those listed as Globally Systematically Important Banks (G-SIBs) were more likely to issue CoCos. These results are difficult to explain by traditional capital structure theory, which assumes that companies voluntarily choose their optimal capital structures, but suggest that banks were more likely to be encouraged or nudged to issue CoCos by following regulators’ advice.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"58 - 73"},"PeriodicalIF":0.0,"publicationDate":"2022-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46311669","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":"Pricing Total Return Swaps","authors":"W. Lou","doi":"10.3905/jod.2022.1.167","DOIUrl":"https://doi.org/10.3905/jod.2022.1.167","url":null,"abstract":"Total return swap (TRS) involves a pricing dilemma: LIBOR discounting of its premium leg forces upfront payment of future funding premium, and yet replacing LIBOR with a firm’s own funding rate falls into the well-known FVA debate trap. We consider TRS hedge financing from a repo market perspective and apply postcrisis derivatives valuation with collateralization and funding to TRS. We find that the financing cost of the TRS hedge should be reflected on the security leg, and the funding premium can only be discounted in conjunction with the TRS as a whole, depending on margining schemes. An easy to implement, recursive tree model is developed to value TRS with repo-style margining or defaultable underlying, together with any value adjustments.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"66 - 83"},"PeriodicalIF":0.0,"publicationDate":"2022-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48502229","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":"Semi-Analytical Pricing of Barrier Options in the Time-Dependent λ-SABR Model: Uncorrelated Case","authors":"A. Itkin, D. Muravey","doi":"10.3905/jod.2022.1.166","DOIUrl":"https://doi.org/10.3905/jod.2022.1.166","url":null,"abstract":"We consider semi-analytical pricing of barrier options for the time-dependent SABR stochastic volatility model (with drift in the instantaneous volatility) with zero correlation between spot and stochastic volatility. In doing so, we modify the general integral transform method (see Itkin et al. 2021) and deliver solution of this problem in the form of Fourier-Bessel series. The weights of this series solve a linear mixed Volterra-Fredholm equation (LMVF) of the second kind also derived in the article. Numerical examples illustrate the speed and accuracy of our method, which are comparable with those of the finite-difference approach at small maturities and outperform them at high maturities even by using a simplistic implementation of the RBF method for solving the LMVF.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"74 - 101"},"PeriodicalIF":0.0,"publicationDate":"2022-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42979858","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":"Zero Black-Derman-Toy Model in Catastrophic Events: COVID-19 Performance Analysis","authors":"G. Krzyzanowski, Andr'es Sosa","doi":"10.3905/jod.2022.1.164","DOIUrl":"https://doi.org/10.3905/jod.2022.1.164","url":null,"abstract":"In this article, we continue the research of our recent interest rate tree model, called the Zero Black-Derman-Toy (ZBDT) model, which includes the possibility of a jump at each step to a practically zero interest rate. This approach allows a better match with the risk of financial slowdown caused by catastrophic events. We present how to valuate a wide range of financial derivatives using such a model. The classical Black-Derman-Toy (BDT) model and a novel ZBDT model are described, and analogies in their calibration methodology are established. Finally, two cases of applications of the novel ZBDT model are introduced. The first is the hypothetical case of an S-shaped term structure and decreasing volatility of yields. The second case is an application in the structure of US sovereign bonds in the 2020 economic slowdown caused by the coronavirus pandemic. The objective of this study is to understand the differences presented by the valuation in both models for exotic derivatives.","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"30 1","pages":"103 - 118"},"PeriodicalIF":0.0,"publicationDate":"2022-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48829137","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":"Editor’s Letter","authors":"Joseph M. Pimbley","doi":"10.3905/jod.2022.29.5.001","DOIUrl":"https://doi.org/10.3905/jod.2022.29.5.001","url":null,"abstract":"","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"29 1","pages":"1 - 4"},"PeriodicalIF":0.0,"publicationDate":"2022-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45514078","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":"Editor’s Letter","authors":"Joseph M. Pimbley, Frank J. Fabozzi","doi":"10.3905/jod.2022.29.4.001","DOIUrl":"https://doi.org/10.3905/jod.2022.29.4.001","url":null,"abstract":"","PeriodicalId":34223,"journal":{"name":"Jurnal Derivat","volume":"29 1","pages":"1 - 5"},"PeriodicalIF":0.0,"publicationDate":"2022-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46477558","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}