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What Do We Learn from the Price of Crude Oil Futures?

Alquist, Ron; Kilian, Lutz - C.E.P.R. Discussion Papers - 2007

Based on a two-country, two-period general equilibrium model of the spot and futures markets for crude oil, we show that there is no theoretical support for the common view that oil futures prices are good predictors of the spot price in the mean-squared error sense; yet under certain conditions...

Persistent link: https://www.econbiz.de/10005792183

Demand-Based Option Pricing

Garleanu, Nicolae Bogdan; Pedersen, Lasse Heje; … - C.E.P.R. Discussion Papers - 2005

pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the … option. Similarly, the demand pressure increases the price of any other option by an amount proportional to the covariance of … show that demand-pressure effects contribute to well-known option-pricing puzzles. Indeed, time-series tests show that …

Persistent link: https://www.econbiz.de/10005067592

Late Informed Betting and the Favourite-Longshot Bias

Ottaviani, Marco; Sørensen, Peter Norman - C.E.P.R. Discussion Papers - 2003

According to the favorite-longshot bias observed in pari-mutuel betting, the final distribution of bets overestimates the winning chance of longshots. This Paper proposes an explanation of this bias based on late betting by small privately informed bettors. These bettors have an incentive to...

Persistent link: https://www.econbiz.de/10005504377

Excessive continuation and Dynamic Agency Costs of Debt

Décamps, Jean Paul; Faure-Grimaud, Antoine - C.E.P.R. Discussion Papers - 2000

, stochastic environment. Keeping the firm as an ongoing concern has an option value but equity and debt holders value it … option approach, we characterize the resulting agency costs of debt, derive the ‘price’ of these costs and analyse their …

Persistent link: https://www.econbiz.de/10005504424

New Techniques to Extract Market Expectations from Financial Instruments

Söderlind, Paul; Svensson, Lars E O - C.E.P.R. Discussion Papers - 1997

to extract not only the means, but also the whole (risk neutral) probability distribution from a set of option prices. …

Persistent link: https://www.econbiz.de/10005504605

Direct Estimation of the Risk Neutral Factor Dynamics of Affine Term Structure Models

Bams, Dennis; Schotman, Peter C - C.E.P.R. Discussion Papers - 1998

This paper proposes a panel data framework for tests of affine models of the term structure of interest rates which cover equilibrium (or endogenous) models as well as extended (or exogenous, evolutionary) models. The econometric model pools yield curve data for different moments in time. Since...

Persistent link: https://www.econbiz.de/10005498193

Implied Volatility Functions: Empirical Tests

Dumas, Bernard J; Fleming, Jeff; Whaley, Robert E - C.E.P.R. Discussion Papers - 1996

Black and Scholes (1973) implied volatilities tend to be systematically related to the option’s exercise price and time … function (DVF) option valuation model, which has the potential of fitting the observed cross-section of option prices exactly … and hedging performance of the DVF option valuation model. …

Persistent link: https://www.econbiz.de/10005498195

Too-Systemic-To-Fail: What Option Markets Imply About Sector-wide Government Guarantees

Kelly, Bryan; Lustig, Hanno; van Nieuwerburgh, Stijn - C.E.P.R. Discussion Papers - 2012

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets. A …-index put spread. …

Persistent link: https://www.econbiz.de/10011083289

Carry

Koijen, Ralph; Moskowitz, Tobias J; Pedersen, Lasse Heje; … - C.E.P.R. Discussion Papers - 2013

Any security’s expected return can be decomposed into its “carry” and its expected price appreciation, where carry is a model-free characteristic that can be observed in advance. While carry has been studied almost exclusively for currencies, we find that carry predicts returns both in the...

Persistent link: https://www.econbiz.de/10011083673

Volatility Risk Premia and Exchange Rate Predictability

Della Corte, Pasquale; Ramadorai, Tarun; Sarno, Lucio - C.E.P.R. Discussion Papers - 2013

We investigate the predictive information content in foreign exchange volatility risk premia for exchange rate returns. The volatility risk premium is the difference between realized volatility and a model-free measure of expected volatility that is derived from currency options, and reflects...

Persistent link: https://www.econbiz.de/10011084715