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Investor fears and risk premia for rare events

Schwarz, Claudia - 2014 - This version: January 13, 2014

This paper uses the method developed by Bollerslev and Todorov (2011b) to estimate risk premia for extreme events for the US and the German stock markets. The method extracts jump tail measures from high-frequency futures price data and from options data. In a second step, jump tail...

Persistent link: https://www.econbiz.de/10010249730

Modeling Conditional Factor Risk Premia Implied by Index Option Returns

Fournier, Mathieu; Jacobs, Kris; Orłowski, Piotr - 2021

We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk premia can vary nonlinearly with states. The model is estimated using regressions, with minimal assumptions on factor and option return dynamics. Using index options, we...

Persistent link: https://www.econbiz.de/10013213854

Insurance options : beating the benchmark : are catastrophe bonds more profitable than corporate bonds?

Caro Barrera, José Rafael - In: Revista de métodos cuantitativos para la economía y … 29 (2020), pp. 3-17

In this paper, we establish a comparison between one of the most traded financial derivatives in the markets, the so-called catastrophe bonds (abbreviated as cat bonds) and the corporate bonds. In the first section, we start from a brief definition as well as some basic concepts. In section two,...

Persistent link: https://www.econbiz.de/10012259883

Extreme inflation and time-varying consumption growth

Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian - 2019

way to come up with a measure of time-varying disaster risk in the spirit of Wachter (2013). Our findings imply that both … the disaster and the long-run risk paradigm can be extended towards explaining movements in the stock-bond return …

Persistent link: https://www.econbiz.de/10012000570

Aggregate Tail Risk and Expected Returns

Chapman, David A. - 2016

We examine the connection between tail risk — as measured in Kelly and Jiang (2014) — and the cross-section of expected returns. In conditional predictive regression systems and vector-autoregressions of the market portfolio and the long- and shoresides of the Fama-French factor portfolios,...

Persistent link: https://www.econbiz.de/10013005673

Consumption-based asset pricing with rare disaster risk

Grammig, Joachim; Sönksen, Jantje - 2014

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because … in theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption … plausible size, and the estimation precision is much higher than in previous studies that use the canonical CBM. Our results …

Persistent link: https://www.econbiz.de/10010412353

Consumption-based asset pricing with rare disaster risk

Grammig, Joachim; Sönksen, Jantje - 2014

Persistent link: https://www.econbiz.de/10010388611

Consumption-based asset pricing with rare disaster risk : a simulated method of moments approach ; conference paper

Grammig, Joachim; Sönksen, Jantje - 2014

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because … theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption-based asset … plausible size, and the estimation precision is much higher than in previous studies that use the canonical CBM. A comparable …

Persistent link: https://www.econbiz.de/10010491152

Macroeconomic Uncertainty and the Cross-Section of Option Returns

Aramonte, Sirio - 2012

I empirically investigate whether macroeconomic uncertainty is a priced risk factor in the cross-section of equity and index option returns. The analysis employs a non-linear factor model, estimated with the Fama-MacBeth methodology, where the macroeconomic uncertainty factor is the return on a...

Persistent link: https://www.econbiz.de/10013097881

The term structure of systematic and idiosyncratic risk

Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...

Persistent link: https://www.econbiz.de/10011751173