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Construction and Interpretation of Model-Free Implied Volatility

Andersen, Torben G.; Bondarenko, Oleg - National Bureau of Economic Research (NBER) - 2007

The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...

Persistent link: https://www.econbiz.de/10005774581

Parametric Inference and Dynamic State Recovery from Option Panels

Andersen, Torben G.; Fusari, Nicola; Todorov, Viktor - National Bureau of Economic Research (NBER) - 2012

We develop a new parametric estimation procedure for option panels observed with error which relies on asymptotic … approximations assuming an ever increasing set of observed option prices in the moneyness- maturity (cross-sectional) dimension, but … vector that governs the option price dynamics. The estimators converge stably to a mixed-Gaussian law and we develop feasible …

Persistent link: https://www.econbiz.de/10011271459

Testing Portfolio Efficiency with Conditioning Information

Ferson, Wayne; Siegel, Andrew F. - National Bureau of Economic Research (NBER) - 2006

We develop asset pricing models' implications for portfolio efficiency when there is conditioning information in the form of a set of lagged instruments. A model of expected returns identifies a portfolio that should be minimum variance efficient with respect to the conditioning information. Our...

Persistent link: https://www.econbiz.de/10005034911

CAPM Over the Long Run: 1926-2001

Ang, Andrew; Chen, Joseph - National Bureau of Economic Research (NBER) - 2005

A conditional one-factor model can account for the spread in the average returns of portfolios sorted by book-to-market ratios over the long run from 1926-2001. In contrast, earlier studies document strong evidence of a book-to-market effect using OLS regressions in the post-1963 sample....

Persistent link: https://www.econbiz.de/10005079160

Econometric Measures of Systemic Risk in the Finance and Insurance Sectors

Billio, Monica; Lo, Andrew W.; Pelizzon, Loriana; … - National Bureau of Economic Research (NBER) - 2010

We propose several econometric measures of systemic risk to capture the interconnectedness among the monthly returns of hedge funds, banks, brokers, and insurance companies based on principal components analysis and Granger-causality tests. We find that all four sectors have become highly...

Persistent link: https://www.econbiz.de/10008540040

Option-Based Credit Spreads

Culp, Christopher L.; Nozawa, Yoshio; Veronesi, Pietro - National Bureau of Economic Research (NBER) - 2014

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We … by standard risk factors and unlikely to be solely due to illiquidity. Our option-based approach also offers a novel …

Persistent link: https://www.econbiz.de/10011103514

On the Fundamental Relation Between Equity Returns and Interest Rates

Choi, Jaewon; Richardson, Matthew P.; Whitelaw, Robert F. - National Bureau of Economic Research (NBER) - 2014

This paper uses contingent claim asset pricing and exploits capital structure priority to better understand the relation between corporate security returns and interest rate changes (i.e., duration). We show theoretically and, using a novel dataset, confirm empirically that lower priority...

Persistent link: https://www.econbiz.de/10010821721

Bubbles, Food Prices, and Speculation: Evidence from the CFTC's Daily Large Trader Data Files

Aulerich, Nicole M.; Irwin, Scott H.; Garcia, Philip - National Bureau of Economic Research (NBER) - 2013

The "Masters Hypothesis" is the claim that unprecedented buying pressure from new financial index investors created a massive bubble in agricultural futures prices at various times in recent years. This paper analyzes the market impact of financial index investment in agricultural futures...

Persistent link: https://www.econbiz.de/10010969324

Commodity and Asset Pricing Models: An Integration

Cortazar, Gonzalo; Kovacevic, Ivo; Schwartz, Eduardo S. - National Bureau of Economic Research (NBER) - 2013

We present a simple methodology that integrates commodity and asset pricing models. Given current evidence on the financialization of commodity markets, valuable information about commodity risk premiums can be extracted from asset pricing models and used to substantially improve the estimates...

Persistent link: https://www.econbiz.de/10010950668

Risk, Ambiguity, and the Exercise of Employee Stock Options

Izhakian, Yehuda; Yermack, David - National Bureau of Economic Research (NBER) - 2014

option exercises, with volatility causing executives to hold their options longer in order to preserve remaining option value …

Persistent link: https://www.econbiz.de/10010950897