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On certain representations of pricing functionals 关于定价函数的某些表示
IF 0.8
Annals of Finance Pub Date : 2024-03-15 DOI: 10.1007/s10436-024-00438-5
Carlo Marinelli
{"title":"On certain representations of pricing functionals","authors":"Carlo Marinelli","doi":"10.1007/s10436-024-00438-5","DOIUrl":"10.1007/s10436-024-00438-5","url":null,"abstract":"<div><p>We revisit two classical problems: the determination of the law of the underlying with respect to a risk-neutral measure on the basis of option prices, and the pricing of options with convex payoffs in terms of prices of call options with the same maturity (all options are European). The formulation of both problems is expressed in a language loosely inspired by the theory of inverse problems, and several proofs of the corresponding solutions are provided that do not rely on any special assumptions on the law of the underlying and that may, in some cases, extend results currently available in the literature. Furthermore, we consider a related problem, arising from nonparametric option pricing, on the reconstruction of put option prices in an approximation scheme where a sequence of measures converges to the (image) measure of the underlying’s return at fixed maturities.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"20 1","pages":"91 - 127"},"PeriodicalIF":0.8,"publicationDate":"2024-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-024-00438-5.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140156966","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Skewness-seeking behavior and financial investments 偏斜寻求行为与金融投资
IF 0.8
Annals of Finance Pub Date : 2024-02-26 DOI: 10.1007/s10436-023-00437-y
Matteo Benuzzi, Matteo Ploner
{"title":"Skewness-seeking behavior and financial investments","authors":"Matteo Benuzzi,&nbsp;Matteo Ploner","doi":"10.1007/s10436-023-00437-y","DOIUrl":"10.1007/s10436-023-00437-y","url":null,"abstract":"<div><p>Recent theoretical and empirical advancements highlight the pivotal role played by higher-order moments, such as skewness, in shaping financial decision-making. Nevertheless, contemporary experimental research predominantly relies on limited-outcome lotteries, an oversimplified representation distant from real-world investment dynamics. To bridge this research gap, we conducted a rigorously pre-registered experiment. Our study delves into individuals’ preferences for investment opportunities, examining the influence of skewness of continuous probability distributions of returns. We document an inclination towards positively skewed outcome distributions. Furthermore, we uncovered a substitution effect between risk appetite and the sign of skewness. Finally, we unveiled a robust positive correlation between skewness-seeking behavior and a propensity for speculative behavior. Simultaneously, a distinct negative correlation surfaced between skewness-seeking behavior and the perceived risk associated with positive skewness.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"20 1","pages":"129 - 165"},"PeriodicalIF":0.8,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00437-y.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139979641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Affine Heston model style with self-exciting jumps and long memory 具有自激跳跃和长记忆的 Affine Heston 模型风格
IF 0.8
Annals of Finance Pub Date : 2024-01-12 DOI: 10.1007/s10436-023-00436-z
Charles Guy Njike Leunga, Donatien Hainaut
{"title":"Affine Heston model style with self-exciting jumps and long memory","authors":"Charles Guy Njike Leunga,&nbsp;Donatien Hainaut","doi":"10.1007/s10436-023-00436-z","DOIUrl":"10.1007/s10436-023-00436-z","url":null,"abstract":"<div><p>Classic diffusion processes fail to explain asset return volatility. Many empirical findings on asset return time series, such as heavy tails, skewness and volatility clustering, suggest decomposing the volatility of an asset’s return into two components, one caused by a Brownian motion and another by a jump process. We analyze the sensitivity of European call options to memory and self-excitation parameters, underlying price, volatility and jump risks. We expand Heston’s stochastic volatility model by adding to the instantaneous asset prices, a jump component driven by a Hawkes process with a kernel function or memory kernel that is a Fourier transform of a probability measure. This kernel function defines the memory of the asset price process. For instance, if it is fast decreasing, the contagion effect between asset price jumps is limited in time. Otherwise, the processes remember the history of asset price jumps for a long period. To investigate the impact of different rates of decay or types of memory, we consider four probability measures: Laplace, Gaussian, Logistic and Cauchy. Unlike Hawkes processes with exponential kernels, the Markov property is lost but stationarity is preserved; this ensures that the unconditional expected arrival rate of the jump does not explode. In the absence of the Markov property, we use the Fourier transform representation to derive a closed form expression of a European call option price based on characteristic functions. A numerical illustration shows that our extension of the Heston model achieves a better fit of the Euro Stoxx 50 option data than the standard version.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"20 1","pages":"1 - 43"},"PeriodicalIF":0.8,"publicationDate":"2024-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139437704","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
How does soft information on the causes of default affect debt renegotiation? The Italian evidence 关于违约原因的软信息如何影响债务重新谈判？意大利的证据
IF 0.8
Annals of Finance Pub Date : 2024-01-11 DOI: 10.1007/s10436-023-00435-0
Ludovico Maria Cocco, Elisa Cavezzali, Ugo Rigoni, Giorgia Simion
{"title":"How does soft information on the causes of default affect debt renegotiation? The Italian evidence","authors":"Ludovico Maria Cocco,&nbsp;Elisa Cavezzali,&nbsp;Ugo Rigoni,&nbsp;Giorgia Simion","doi":"10.1007/s10436-023-00435-0","DOIUrl":"10.1007/s10436-023-00435-0","url":null,"abstract":"<div><p>The paper investigates the complementary role of hard and soft information in affecting the bankruptcy outcome of in-court procedures. Previous literature mostly focuses on hard information as driver of the bankruptcy outcome. In a bankruptcy context, we identify the causes of default as a key piece of soft information which can emerge through a textual analysis of the legal papers written by the insolvency practitioners. We posit that soft information complements hard information in guiding creditors’ choice of the bankruptcy outcome. To test our hypotheses, we construct a unique dataset composed of hard and soft information of Italian Small and Medium Enterprises that faced in-court debt renegotiation between 2011 and 2016. We show that the role of hard information in guiding creditors’ decisions depends on the specific cause of default they interact with and we conclude that the two sets of information jointly shape the conditions for the bankruptcy outcome.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"20 1","pages":"45 - 89"},"PeriodicalIF":0.8,"publicationDate":"2024-01-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139438216","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 kind of silence: managing a reputation for voluntary disclosure in financial markets 那种沉默:在金融市场上维护自愿披露信息的声誉
IF 1
Annals of Finance Pub Date : 2023-10-13 DOI: 10.1007/s10436-023-00430-5
Miles B. Gietzmann, Adam J. Ostaszewski
{"title":"The kind of silence: managing a reputation for voluntary disclosure in financial markets","authors":"Miles B. Gietzmann,&nbsp;Adam J. Ostaszewski","doi":"10.1007/s10436-023-00430-5","DOIUrl":"10.1007/s10436-023-00430-5","url":null,"abstract":"<div><p>We create a continuous-time setting in which to investigate how the management of a firm controls a dynamic choice between two generic voluntary disclosure decision rules (strategies) in the period between two consecutive mandatory disclosure dates: one with full and transparent disclosure termed <i>candid</i>, the other, termed <i>sparing</i>, under which values only above a dynamic threshold are disclosed. We show how parameters of the model such as news intensity, pay-for-performance and time-to-mandatory-disclosure determine the optimal choice of candid versus sparing strategies and the optimal times for management to switch between the two. The model presented develops a number of insights, based on a very simple ordinary differential equation characterizing equilibrium in a piecewise-deterministic model, derivable from the background Black–Scholes model and Poisson arrival of signals of firm value. It is shown that in equilibrium when news intensity is low a firm may employ a <i>candid</i> disclosure strategy throughout, but will otherwise switch (alternate) between periods of being <i>candid</i> and periods of being <i>sparing</i> with the truth (or the other way about). <i>Significantly, with constant pay-for-performance parameters, at most one switching can occur.\u0000</i></p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 4","pages":"419 - 447"},"PeriodicalIF":1.0,"publicationDate":"2023-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00430-5.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135854261","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Nonparametric estimates of option prices via Hermite basis functions 基于Hermite基函数的期权价格非参数估计
IF 1
Annals of Finance Pub Date : 2023-08-04 DOI: 10.1007/s10436-023-00431-4
Carlo Marinelli, Stefano d’Addona
{"title":"Nonparametric estimates of option prices via Hermite basis functions","authors":"Carlo Marinelli,&nbsp;Stefano d’Addona","doi":"10.1007/s10436-023-00431-4","DOIUrl":"10.1007/s10436-023-00431-4","url":null,"abstract":"<div><p>We consider approximate pricing formulas for European options based on approximating the logarithmic return’s density of the underlying by a linear combination of rescaled Hermite polynomials. The resulting models, that can be seen as perturbations of the classical Black-Scholes one, are nonpararametric in the sense that the distribution of logarithmic returns at fixed times to maturity is only assumed to have a square-integrable density. We extensively investigate the empirical performance, defined in terms of out-of-sample relative pricing error, of this class of approximating models, depending on their order (that is, roughly speaking, the degree of the polynomial expansion) as well as on several ways to calibrate them to observed data. Empirical results suggest that such approximate pricing formulas, when compared with simple nonparametric estimates based on interpolation and extrapolation on the implied volatility curve, perform reasonably well only for options with strike price not too far apart from the strike prices of the observed sample.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 4","pages":"477 - 522"},"PeriodicalIF":1.0,"publicationDate":"2023-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00431-4.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47130086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
Robustness and sensitivity analyses of rough Volterra stochastic volatility models 粗糙Volterra随机波动模型的鲁棒性和敏感性分析
IF 1
Annals of Finance Pub Date : 2023-08-04 DOI: 10.1007/s10436-023-00433-2
Jan Matas, Jan Pospíšil
{"title":"Robustness and sensitivity analyses of rough Volterra stochastic volatility models","authors":"Jan Matas,&nbsp;Jan Pospíšil","doi":"10.1007/s10436-023-00433-2","DOIUrl":"10.1007/s10436-023-00433-2","url":null,"abstract":"<div><p>In this paper, we analyze the robustness and sensitivity of various continuous-time rough Volterra stochastic volatility models in relation to the process of market calibration. Model robustness is examined from two perspectives: the sensitivity of option price estimates and the sensitivity of parameter estimates to changes in the option data structure. The following sensitivity analysis consists of statistical tests to determine whether a given studied model is sensitive to changes in the option data structure based on the distribution of parameter estimates. Empirical study is performed on a data set consisting of Apple Inc. equity options traded on four different days in April and May 2015. In particular, the results for RFSV, rBergomi and <span>(alpha )</span>RFSV models are provided and compared to the results for Heston, Bates, and AFSVJD models.\u0000</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 4","pages":"523 - 543"},"PeriodicalIF":1.0,"publicationDate":"2023-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00433-2.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42354860","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 2
The no-arbitrage pricing of non-traded assets 非交易资产的无套利定价
IF 1
Annals of Finance Pub Date : 2023-08-01 DOI: 10.1007/s10436-023-00434-1
Robert A. Jarrow
{"title":"The no-arbitrage pricing of non-traded assets","authors":"Robert A. Jarrow","doi":"10.1007/s10436-023-00434-1","DOIUrl":"10.1007/s10436-023-00434-1","url":null,"abstract":"<div><p>This paper shows how to uniquely price non-traded assets using no-arbitrage in an otherwise frictionless market setting. The approach requires the assumption that the hedging error, properly defined, is non-priced or idiosyncratic risk. This methodology can be applied to private loans, illiquid publicly traded debt, insurance contacts, private equity, real estate, and real options.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 3","pages":"401 - 418"},"PeriodicalIF":1.0,"publicationDate":"2023-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00434-1.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44061525","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
What can monetary policy tell us about Bitcoin? 关于比特币，货币政策能告诉我们什么？
IF 1
Annals of Finance Pub Date : 2023-07-26 DOI: 10.1007/s10436-023-00432-3
Marcin Pietrzak
{"title":"What can monetary policy tell us about Bitcoin?","authors":"Marcin Pietrzak","doi":"10.1007/s10436-023-00432-3","DOIUrl":"10.1007/s10436-023-00432-3","url":null,"abstract":"<div><p>Bitcoin enthusiasts argue that it is free from central banks decisions and it is a hedge against inflation. Using high-frequency monetary surprises associated with decisions made by the Fed and the ECB, I show that these claims are not supported by the data. Bitcoin systemically reacts to monetary and central bank information shocks. I find that these reactions vary over time: not only by changing the magnitude but sometimes sign of reaction. Fed’s disinflationary shocks increase Bitcoin price, while the ECB’s decrease, hence providing little support for it as an inflation hedge.</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 4","pages":"545 - 559"},"PeriodicalIF":1.0,"publicationDate":"2023-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://link.springer.com/content/pdf/10.1007/s10436-023-00432-3.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48042475","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The value of expected return persistence 持久性的预期回报值
IF 1
Annals of Finance Pub Date : 2023-07-01 DOI: 10.1007/s10436-023-00428-z
Wolfgang Schadner, Sebastian Lang
{"title":"The value of expected return persistence","authors":"Wolfgang Schadner,&nbsp;Sebastian Lang","doi":"10.1007/s10436-023-00428-z","DOIUrl":"10.1007/s10436-023-00428-z","url":null,"abstract":"<div><p>This work utilizes the fractional Black–Scholes model to estimate the option-implied Hurst exponents, interpreted as forward-looking expectations of return persistence. The focus of the paper is on how corresponding believes enter into factor based asset pricing models. Empirical analyses are carried out for the cross-section of S &amp;P 500 stocks. We make the important observations that (i) stock returns show significant patterns of time-varying persistence and (ii) corresponding believes are reflected within option prices. Incorporating the Hurst exponents allows us to split up CAPM betas into pure market correlation risk (around 70–80%) and into excess persistence believes (about 20–30% of the risk loading). A direct comparison to standard CAPM shows that incorporating persistence believes significantly improves the predictability of future realized returns, and partially releases the beta anomaly. The effects become even stronger the greater the prediction horizon. Hence, the concept of fractal motions enables a deeper understanding of risk structures without the need of additional risk factors.\u0000</p></div>","PeriodicalId":45289,"journal":{"name":"Annals of Finance","volume":"19 4","pages":"449 - 476"},"PeriodicalIF":1.0,"publicationDate":"2023-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42064121","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
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