Similar Search Results

Boyarchenko, Nina; Fuster, Andreas; Lucca, David O. - 2014

Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...

Persistent link: https://www.econbiz.de/10010404146

Measuring limits of Arbitrage in fixed-income markets

Fontaine, Jean-Sébastien; Nolin, Guillaume - 2017

We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent … deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond. A pseudo … therefore a better proxy for limits to arbitrage. We construct relative value indices for the US, UK, Japan, Germany, Italy …

Persistent link: https://www.econbiz.de/10011777981

Foreign exchange dealer asset pricing

Reitz, Stefan; Umlandt, Dennis - 2019

We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of...

Persistent link: https://www.econbiz.de/10012109710

Does the pricing kernel anomaly reflect forward looking beliefs?

Sala, Carlo - 2015

We propose a nonparametric Bayesian approach for the estimation of the pricing kernel. Historical stock returns and option market data are combined through the Dirichlet Process (DP) to construct an option-adjusted physical measure. The precision parameter of the DP process is calibrated to the...

Persistent link: https://www.econbiz.de/10011506354

A benchmark model for financial markets

Platen, Eckhard - 2001

to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free … portfolio ; arbitrage amount …

Persistent link: https://www.econbiz.de/10009614289

Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set

Sala, Carlo; Barone-Adesi, Giovanni - 2015

Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

Persistent link: https://www.econbiz.de/10011506352

What Fed funds futures tell us about monetary policy uncertainty

Fontaine, Jean-Sébastien - 2016

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it...

Persistent link: https://www.econbiz.de/10011576374

Black scholes for portfolios of options in discrete time : the price is right, the hedge is wrong

Peeters, Bas; Dert, Cees; Lucas, André - 2003

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the limit of large portfolio size is substantially different...

Persistent link: https://www.econbiz.de/10011334345

Option-implied term structures

Vogt, Erik - 2014

The illiquidity of long-maturity options has made it difficult to study the term structures of option spanning portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses long-maturity illiquidity. By building a sieve estimator...

Persistent link: https://www.econbiz.de/10010459730

Testing market efficiency with the pricing kernel

Barone-Adesi, Giovanni; Sala, Carlo - 2019

Market efficiency and the pricing kernel are closely related. A non-monotonic decreasing pricing kernel implies the existence of a trading strategy in contingent claims that stochastically dominates a direct investment in the market. Moreover, a market is assumed to be efficient only if no...

Persistent link: https://www.econbiz.de/10012179592

1
2
3
4
5
6
7
8
9
10
Next
Last