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Improving Portfolio Selection Using Option-Implied Volatility and Skewness

DeMiguel, Victor; Plyakha, Yuliya; Uppal, Raman; … - C.E.P.R. Discussion Papers - 2010

weights, one needs to estimate for each stock its volatility, correlations with all other stocks, and expected return. Our … contained in the volatility risk premium and option-implied skewness increases substantially Sharpe ratios and certainty …

Persistent link: https://www.econbiz.de/10008530360

Testing Asymmetric-Information Asset Pricing Models

Kelly, Bryan; Ljungqvist, Alexander P. - C.E.P.R. Discussion Papers - 2009

Theoretical asset pricing models routinely assume that investors have heterogeneous information. We provide direct evidence of the importance of information asymmetry for asset prices and investor demands using plausibly exogenous variation in the supply of information caused by the closure or...

Persistent link: https://www.econbiz.de/10005792510

Limits to Arbitrage and Hedging: Evidence from Commodity Markets

Acharya, Viral V; Lochstoer, Lars; Ramadorai, Tarun - C.E.P.R. Discussion Papers - 2009

and inventories, consistent with our model. Our analysis demonstrates that limits to financial arbitrage can generate …

Persistent link: https://www.econbiz.de/10005016244

Carry

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

, and volatility risks, its performance presents a challenge to asset pricing models. …

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

Demand-Based Option Pricing

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

We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand 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...

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

Insider Trading in Credit Derivatives

Acharya, Viral V; Johnson, Tim - C.E.P.R. Discussion Papers - 2005

Insider trading in the credit derivatives market has become a significant concern for regulators and participants. This paper attempts to quantify the problem. Using news reflected in the stock market as a benchmark for public information, we report evidence of significant incremental...

Persistent link: https://www.econbiz.de/10005666591

Liquidity Risk and Correlation Risk: A Clinical Study of the General Motors and Ford Downgrade of May 2005

Acharya, Viral V; Schaefer, Stephen M; Zhang, Yili - C.E.P.R. Discussion Papers - 2007

The GM and Ford downgrade to junk status during May 2005 caused a wide-spread sell-off in their corporate bonds. Using a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market-makers, as evidenced in the significant imbalance in their quotes...

Persistent link: https://www.econbiz.de/10005123999

Performance Maximization of Actively Managed Funds

Guasoni, Paolo; Huberman, Gur; Wang, Zhenyu - C.E.P.R. Discussion Papers - 2010

Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...

Persistent link: https://www.econbiz.de/10008468707

The Effect of Introducing a Non-redundant Derivative on the Volatility of Stock-Market Returns

Bhamra, Harjoat Singh; Uppal, Raman - C.E.P.R. Discussion Papers - 2006

We study the effect of introducing a new security, such as a non-redundant derivative, on the volatility of stock … increases the volatility of stock-market returns. …

Persistent link: https://www.econbiz.de/10005114422

The Dynamics of Financially Constrained Arbitrage

Gromb, Denis; Vayanos, Dimitri - C.E.P.R. Discussion Papers - 2015

We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital … the dynamics of arbitrage activity are self-correcting: following a shock that depletes arbitrage capital, profitability … trades, although arbitrageurs cut their positions in these trades the least. When arbitrage capital is more mobile across …

Persistent link: https://www.econbiz.de/10011184076