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Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S&P 500 Options

Santa-Clara, Pedro - 2005

We use a novel pricing model to filter times series of diffusive volatility and jump intensity from Samp;P 500 index … about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex …

Persistent link: https://www.econbiz.de/10012785090

Construction and Interpretation of Model-Free Implied Volatility

Andersen, Torben - 2007

The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility … more compatible with the related concept of corridor implied volatility (CIV). We provide a comprehensive derivation of the … CIV measure and relate it to MFIV under general assumptions. In addition, we price the various volatility contracts, and …

Persistent link: https://www.econbiz.de/10012775913

Do Rare Events Explain Cdx Tranche Spreads?

Seo, Sang Byung - 2016

equity premium and with aggregate stock market volatility. Our results demonstrate the importance of beliefs about rare …

Persistent link: https://www.econbiz.de/10012981618

Real Options, Taxes and Financial Leverage

Myers, Stewart C. - 2012

We show how the value of a real option depends on corporate income taxes and the option's "debt capacity," defined as the amount of debt supported or displaced by the option. The value of the underlying asset must be an adjusted present value (APV). The risk-free rate of interest must be...

Persistent link: https://www.econbiz.de/10013104988

Microeconomic Origins of Macroeconomic Tail Risks

Acemoglu, Daron - 2015

We document that even though the normal distribution provides a good approximation to GDP fluctuations, it severely underpredicts “macroeconomic tail risks,” that is, the frequency of large economic downturns. Using a multi-sector general equilibrium model, we show that the interplay of...

Persistent link: https://www.econbiz.de/10013030060

Real Option Exercise : Empirical Evidence

Décaire, Paul - 2019

volatility. We identify peer effects using localized exogenous variation in peer project exercise decisions and find evidence …

Persistent link: https://www.econbiz.de/10012891314

Locked Up by a Lockup : Valuing Liquidity as a Real Option

Ang, Andrew - 2010

Hedge funds often impose lockups and notice periods to limit the ability of investors to withdraw capital. We model the investor's decision to withdraw capital as a real option and treat lockups and notice periods as exercise restrictions. Our methodology incorporates time-varying probabilities...

Persistent link: https://www.econbiz.de/10013144497

Congressional Vote Options

King, David C.; Zeckhauser, Richard - 2022

Among political practitioners, there is conventional wisdom about the outcomes of critical and salient legislative votes. 'This vote,' we hear, ' will either win by a little or lose by a lot.' Real-world examples suggest coalition leaders purchase 'hip-pocket' votes and "if you need me" pledges,...

Persistent link: https://www.econbiz.de/10014175679

Option-Based Credit Spreads

Culp, Christopher L. - 2014

We present a novel empirical benchmark for analyzing credit risk using “pseudo firms” that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo-firm assets. Empirically, like corporate...

Persistent link: https://www.econbiz.de/10013039754

Average Interest

Chacko, George; Das, Sanjiv R. - 2021

We develop analytic pricing models for options on averages by means of a state-space expansion method. These models augment the class of Asian options to markets where the underlying traded variable follows a mean-reverting process. The approach builds from the digital Asian option on the...

Persistent link: https://www.econbiz.de/10013220083