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Platen, Eckhard - 2001

This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices and portfolios is derived. Furthermore, the short rate is...

Persistent link: https://www.econbiz.de/10010310423

A minimal financial market model

Platen, Eckhard - 2000

The paper proposes a financial market model that generates stochastic volatility and stochastic interest rate using a … stochastic volatility with leptokurtic log-return distributions that c1osely match those observed in reality. The resulting index … of the market is negatively correlated with its volatility which models the well-known leverage effect. The average …

Persistent link: https://www.econbiz.de/10010310191

Net buying pressure and informed trading in the options market: Evidence from earnings announcements

Badshah, Ihsan Ullah; Koerniadi, Hardjo - In: Journal of Risk and Financial Management 15 (2022) 2, pp. 1-9

trading around quarterly earnings announcements is either directionally motivated and/or volatility motivated. We found … volatility-motivated option trading, and our results suggest that this type of option trading could be motivated by hedging …

Persistent link: https://www.econbiz.de/10013201357

A Comparison of Biased Simulation Schemes for Stochastic Volatility Models

Lord, Roger; Koekkoek, Remmert; van Dijk, Dick - 2006

simulation algorithm exists for this process, at present this is not the case for the Heston stochastic volatility model, where …

Persistent link: https://www.econbiz.de/10010325371

Asymptotic extrapolation of model-free implied variance: exploring structural underestimation in the VIX Index

Stahl, Philip - In: Review of Derivatives Research 25 (2022) 3, pp. 315-339

We show that the VIX Index structurally underestimates model-free implied volatility because its implementation omits … extrapolation of the volatility smile in the tails. We use the asymptotic behavior of the volatility surface to construct a … low volatility. This cannot be observed for the Volatility-of-VIX Index. …

Persistent link: https://www.econbiz.de/10015192461

The contribution of transaction costs to expected stock returns: A novel measure

Hiraki, Kazuhiro; Skiadopoulos, George - 2023

We document that a theoretically founded, real-time, and easy-to-implement option-based measure, termed synthetic-stock difference (SSD), accurately estimates the part of stock's expected return arising from stock's transaction costs. We calculate SSD for U.S. optionable stocks. SSD can be more...

Persistent link: https://www.econbiz.de/10014480627

Quantile hedging

Föllmer, Hans; Leukert, Peter - 1998

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

Persistent link: https://www.econbiz.de/10010309909

Efficient hedging: Cost versus shortfall risk

Föllmer, Hans; Leukert, Peter - 1999

An investor faced with a contingent claim may eliminate risk by (super-)hedging in a financial market. As this is often quite expensive, we study partial hedges, which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal...

Persistent link: https://www.econbiz.de/10010310016

Risk premia and financial modelling without measure transformation

Platen, Eckhard - 2000

This paper describes a financial market modelling framework that exploits the notion of a deflator . The denominations of the deflator measured in units of primary assets form a minimal set of basic financial quantities that completely specify the overall market dynamics, where deflated asset...

Persistent link: https://www.econbiz.de/10010310261

Efficient hedging for a complete jump-diffusion model

Kirch, Michael; Krutchenko, R. N.; Melnikov, Aleksandr V. - 2002

This paper is devoted to the problem of hedging contingent claims in the framework of a complete two-factor jump-diffusion model. In this context, it is well understood that every contingent claim can be hedged perfectly if one invests the unique arbitrage-free price. Based on the results of H....

Persistent link: https://www.econbiz.de/10010310520