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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

Improving Portfolio Selection Using Option-Implied Volatility and Skewness

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

Our objective in this paper is to examine whether one can use option-implied information to improve mean-variance portfolio selection with a large number of stocks, and to document which aspects of option-implied information are most useful for improving the out-of-sample performance of...

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

Heterogeneity of Investors and Asset Pricing in a Risk-Value World

Franke, Günter; Weber, Martin - C.E.P.R. Discussion Papers - 2003

Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this Paper, they are derived from risk-value models that generalize the Markowitz-model. We use a behaviourally based risk measure with an endogenous or exogenous benchmark. If the...

Persistent link: https://www.econbiz.de/10005136483

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

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

Limits to Arbitrage and Hedging: Evidence from Commodity Markets

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

futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk …-taking. Increases (decreases) in producers’ hedging demand (the risk-bearing capacity of speculators) increase the costs of hedging … 1980-2006, we show that producers’ hedging demand - proxied by their default risk - forecasts spot prices, futures prices …

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

Corporate Bond Valuation and Hedging with Stochastic Interest Rates and Endogenous Bankruptcy

Acharya, Viral V; Carpenter, Jennifer - C.E.P.R. Discussion Papers - 2002

stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate … produce the same prices, they can have very different hedging implications. We show that empirical results on the relation …

Persistent link: https://www.econbiz.de/10005123555

Hedging and Vertical Integration in Electricity Markets

Aïd, René; Chemla, Gilles; Porchet, Arnaud; Touzi, Nizar - C.E.P.R. Discussion Papers - 2011

forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both … forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. …

Persistent link: https://www.econbiz.de/10008925710

Macro-Hedging for Commodity Exporters

Borensztein, Eduardo; Jeanne, Olivier; Sandri, Damiano - C.E.P.R. Discussion Papers - 2009

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for … commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances …

Persistent link: https://www.econbiz.de/10008577805

The Elephant in the Ground: Managing Oil and Sovereign Wealth

Van Den Bremer, Ton; van der Ploeg, Frederick; Wills, Samuel - C.E.P.R. Discussion Papers - 2014

a fund’s portfolio through additional leverage and hedging. First-best spending should be a share of total wealth, and …

Persistent link: https://www.econbiz.de/10011084308