On Estimating an Asset's Implicit Beta

Siegel (1995) has developed a technique with which the systematic risk of a security (beta) can be estimated without recourse to historical capital market data. Instead, beta is estimated implicitly from the current market prices of exchange options that enable the exchange of a security against shares on the market index. Because this type of exchange options is not currently traded on the capital markets, Siegel's technique cannot yet be used in practice. This article will show that beta can also be estimated implicitly from the current market prices of plain vanilla options, based on the Capital Asset Pricing Model. We provide empirical evidence on implicit betas using prices of exchange options from the EUREX over years 2000 to 2004.

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Year of publication:	2006
Authors:	Husmann, Sven ; Stephan, Andreas
Institutions:	DIW Berlin (Deutsches Institut für Wirtschaftsforschung)
Subject:	Capital Asset Pricing Model \| Beta \| Option Pricing

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Extent:	application/pdf
Series:	Discussion Papers of DIW Berlin. - ISSN 1619-4535.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 640 20 pages long
Classification:	G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004963884