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The choice of valuation techniques in practice : education versus profession

Mukhlynina, Lilia; Nyborg, Kjell G. - 2016

practice. The survey design allows us to control for a respondent's professional subgroup (e.g., consulting), education … than education; different professions have different valuation cultures. Other factors are less important. There are also … capital allocation process. The relative unimportance of education raises questions about the role and benefit of higher level …

Persistent link: https://www.econbiz.de/10011518764

An option to cheat : an application of option theory to realize flipping in underpricing

Stojkovic, Jovan - 2013

The paper proposes a novel direction to rationalize and quantify investors' flipping behavior and its effect on underpricing in IPOs through the use of a structural approach mode. The outcome is a proxy value that replicates investors' flipping behavior. When tested empirically, the model...

Persistent link: https://www.econbiz.de/10010258983

Hedging with small uncertainty aversion

Herrmann, Sebastian; Muhle-Karbe, Johannes; Seifried, … - 2016

We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on their "distance" to a reference local volatility model. In...

Persistent link: https://www.econbiz.de/10011410718

Quantitative modelling of the EUR/CHF exchange rate during the target zone regime of September 2011 to January 2015

Lera, Sandro Claudio; Sornette, Didier - 2015

Krugman (1991)'s target zone model has become the reference of a large part of this literature. Despite its simplicity and elegance, empirical evidence has been lacking. Deriving from Krugman's model analytical expressions for the conditional volatility and density distribution close to the...

Persistent link: https://www.econbiz.de/10011411918

Does market irrationality in the media affect stock returns?

Gibson, Rajna; Hemmens, Christopher; Trépanier, Mathieu - 2015

This paper investigates whether news suggestive of irrationality within financial markets have an impact on stock returns. We construct a lexicon of words for 'market irrationality' and score daily news articles based on the number and proportion of words they contain from the lexicon. We find...

Persistent link: https://www.econbiz.de/10011412095

Information and inventories in high-frequency trading

Muhle-Karbe, Johannes; Webster, Kevin - 2015

We study how short-term informational advantages can be monetized in a high-frequency setting, when large inventories are explicitly penalized. We find that if most of the additional information is revealed regardless of the high-frequency traders' actions, then fast inventory management allows...

Persistent link: https://www.econbiz.de/10011412266

The price of the smile and variance risk premia

Gruber, Peter H.; Tebaldi, Claudio; Trojani, Fabio - 2015 - This version: September 8, 2015

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

Persistent link: https://www.econbiz.de/10011412294

A general closed form option pricing formula

Necula, Ciprian; Drimus, Gabriel; Farkas, Walter - 2016 - This version: 10 March 2016

A new method to retrieve the risk-neutral probability measure from observed option prices is developed and a closed form pricing formula for European options is obtained by employing a modified Gram-Charlier series expansion, known as the Gauss-Hermite expansion. This expansion converges for...

Persistent link: https://www.econbiz.de/10011506359

Herding and stochastic volatility

Farkas, Walter; Necula, Ciprian; Waelchli, Boris - 2015 - This version: 30 September 2015

In this paper we develop a one-factor non-affine stochastic volatility option pricing model where the dynamics of the underlying is endogenously determined from micro-foundations. The interaction and herding of the agents trading the underlying asset induce an amplification of the volatility of...

Persistent link: https://www.econbiz.de/10011507732

A two-factor cointegrated commodity price model with an application to spread option pricing

Farkas, Walter; Gourier, Elise; Huitema, Robert; … - 2016 - This version: May 20, 2016

In this paper, we propose an easy-to-use yet comprehensive model for a system of cointegrated commodity prices. While retaining the exponential affine structure of previous approaches, our model allows for an arbitrary number of cointegration relationships. We show that the cointegration...

Persistent link: https://www.econbiz.de/10011507774