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Nielsen, Lars Tyge - 2019

This paper studies the concept of instantaneous arbitrage in continuous time and its relation to the instantaneous CAPM …. Absence of instantaneous arbitrage is equivalent to the existence of a trading strategy which satisfies the CAPM beta pricing … relation in place of the market. Thus the difference between the arbitrage argument and the CAPM argument in Black and Scholes …

Persistent link: https://www.econbiz.de/10012894845

Squeezing shorts through social news platforms

Allen, Franklin; Nowak, Eric; Pirovano, Matteo; … - 2021 - This draft: April 12, 2021

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by retail...

Persistent link: https://www.econbiz.de/10012502167

Latency and Asset Prices

Kirilenko, Andrei A. - 2015

We measure message processing time or latency inside an automated trading platform. We show that latency is a random variable that has a strong predictive power over both volatility and the volatility of volatility of a highly liquid asset over and above changes in message traffic. We argue that...

Persistent link: https://www.econbiz.de/10013030845

An Asset Pricing Theory of Volatility Tail Behavior

Bakshi, Gurdip - 2012

We contrast two different asset pricing models, where the pricing kernel either (i) increases in the volatility dimension, reflecting investors' aversion to volatility, or (ii) could be non-monotonic in volatility, reflecting heterogeneity in investors' beliefs. The two models yield opposite...

Persistent link: https://www.econbiz.de/10013115088

Beta Risk in the Cross-Section of Equities

Boloor, Ali - 2019

We develop a continuous-time intertemporal CAPM model that allows for risky beta exposure, which we explicitly specify. In the model, the expected return on a stock depends on beta's co-movement with market variance and more generally with the stochastic discount factor and deviates from the...

Persistent link: https://www.econbiz.de/10012899147

Arbitrage-Free Models of Stocks and Bonds

Durham, J. Benson - 2014

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and …

Persistent link: https://www.econbiz.de/10013061074

Arbitrage-free models of stocks and bonds

Durham, J. Benson - 2013

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and …

Persistent link: https://www.econbiz.de/10010222892

Beta risk in the cross-section of equities

Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

Persistent link: https://www.econbiz.de/10011646407

Are Regime Shift Risks Priced in Asset Markets?

Chourdakis, Kyriakos - 2011

In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...

Persistent link: https://www.econbiz.de/10013130931

Conic Asset Pricing and the Costs of Price Fluctuations

Madan, Dilip B. - 2017

Prudent upper and lower valuations from the literature on arbitrage free two price economies provide risk …

Persistent link: https://www.econbiz.de/10012962578