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An Improved Estimator For Black-Scholes-Merton Implied Volatility

Hallerbach, Winfried - Erasmus Research Institute of Management (ERIM), … - 2004

We derive an estimator for Black-Scholes-Merton implied volatility that, when compared to the familiar Corrado & Miller [JBaF, 1996] estimator, has substantially higher approximation accuracy and extends over a wider region of moneyness.

Persistent link: https://www.econbiz.de/10010730867

From Skews to a Skewed-t

de Jong, de Jong, C.M.; Huisman, Huisman, R. - Erasmus Research Institute of Management (ERIM), … - 2000

-style options. We introduce a skewed version of the Student-t distribution, whose main advantage is that its shape depends on only … to compare different distributions and use the parameters as inputs to price other options. We explain the method … provides a better fit to market prices of options than the Shimko or implied tree models, and has a lower computation time than …

Persistent link: https://www.econbiz.de/10010731324

Informed Option Trading Strategies

de Jong, de Jong, C.M. - Erasmus Research Institute of Management (ERIM), … - 2001

lower price errors in the underlying. The more popular options are, the more quickly information is incorporated in the …

Persistent link: https://www.econbiz.de/10010731401

A Comparison of Single Factor Markov-Functional and Multi Factor Market Models

Pietersz, Raoul; Pelsser, Pelsser, A.A.J. - Erasmus Research Institute of Management (ERIM), … - 2005

We compare single factor Markov-functional and multi factor market models for hedging performance of Bermudan swaptions …. We show that hedging performance of both models is comparable, thereby supporting the claim that Bermudan swaptions can …

Persistent link: https://www.econbiz.de/10010731009

A Portrait of Hedge Fund Investors: Flows, Performance and Smart Money

Verbeek, Marno; Baquero, G. - Erasmus Research Institute of Management (ERIM), … - 2005

We explore the flow-performance interrelation by explicitly separating the investment and divestment decisions of hedge fund investors. The results show that different determinants and evaluation horizons underlie both decisions. While money inflows are sensitive to past long-run performance,...

Persistent link: https://www.econbiz.de/10010730987

Survival, Look-Ahead Bias and the Persistence in Hedge Fund Performance

Verbeek, Marno; Baquero, G.; ter Horst, ter Horst, J.R. - Erasmus Research Institute of Management (ERIM), … - 2002

Hedge funds databases are typically subject to high attrition rates because of fund termination and self-selection. Even when all funds are included up to their last available return, one cannot prevent that ex post conditioning biases a.ect standard estimates of performance persistence. In this...

Persistent link: https://www.econbiz.de/10010731037

Generic Market Models

Pietersz, Raoul; van Regenmortel, M. - Erasmus Research Institute of Management (ERIM), … - 2005

Currently, there are two market models for valuation and risk management of interest rate derivatives, the LIBOR and swap market models. In this paper, we introduce arbitrage-free constant maturity swap (CMS) market models and generic market models featuring forward rates that span periods other...

Persistent link: https://www.econbiz.de/10010731227

Fat Tails in Power Prices

Huisman, Huisman, R.; Huurman, C. - Erasmus Research Institute of Management (ERIM), … - 2003

Spot power prices exhibit extreme price jumps and the tendency to oscillate around a long-term mean. Despite these well-known characteristics, electricity price models used for Monte Carlo simulations, VaR related measures, or derivatives valuation, often assume normally distributed residuals....

Persistent link: https://www.econbiz.de/10010731381

Efficient Rank Reduction of Correlation Matrices

Pietersz, Raoul; Grubisic, Grubisic, I. - Erasmus Research Institute of Management (ERIM), … - 2005

Geometric optimisation algorithms are developed that efficiently find the nearest low-rank correlation matrix. We show, in numerical tests, that our methods compare favourably to the existing methods in the literature. The connection with the Lagrange multiplier method is established, along with...

Persistent link: https://www.econbiz.de/10010734981

An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - Erasmus Research Institute of Management (ERIM), … - 2002

Abstract: In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works...

Persistent link: https://www.econbiz.de/10010837529