Showing 1 - 10 of 54
Purpose – This paper aims to construct and compare various total‐return world stock indices based on daily data. Design/methodology/approach – Because of diversification, these indices are noticeably similar. A diversification theorem identifies any diversified portfolio as a proxy for the...
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A stochastic process v(t) is considered as a model for asset's spot volatility. A new approach is introduced for predicting future spot volatility and future volatility surface using a finite set of observed option prices. When the volatility parameter σ2 in the Black-Scholes formula[image...
Persistent link: https://www.econbiz.de/10005495395
In this paper distributions are identified which suitably fit log-returns of the world stock index when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to...
Persistent link: https://www.econbiz.de/10005495378
Without requiring the existence of an equivalent risk-neutral probability measure this paper studies a class of one-factor local volatility function models for stock indices under a benchmark approach. It is assumed that the dynamics for a large diversified index approximates that of the growth...
Persistent link: https://www.econbiz.de/10005495761
This paper considers a modification of the well known constant elasticity of variance model where it is used to model the growth optimal portfolio (GOP). It is shown that, for this application, there is no equivalent risk neutral pricing measure and therefore the classical risk neutral pricing...
Persistent link: https://www.econbiz.de/10005462646
The analysis of diffusion processes in financial models is crucially dependent on the form of the drift and diffusion coefficient functions. A new model for a stock market index process is proposed in which the index is decomposed into an average growth process and an ergodic diffusion. The...
Persistent link: https://www.econbiz.de/10005462672
We analyze portfolio strategies which are locally optimal, meaning that they maximize the Sharpe ratio in a general continuous time jump-diffusion framework. These portfolios are characterized explicitly and compared to utility based strategies. We show that in the presence of jumps, maximizing...
Persistent link: https://www.econbiz.de/10004970131
This paper proposes an alternative approach to the modeling of the interest rate term structure. It suggests that the total market price for risk is an important factor that has to be modeled carefully. The growth optimal portfolio, which is characterized by this factor, is used as reference...
Persistent link: https://www.econbiz.de/10004971762