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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
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The Pricing of Market Jumps in the Cross-Section of Stocks and Options
Babaoglu, Kadir - 2018
Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...
Persistent link: https://www.econbiz.de/10012936701
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Arbitraging Mispriced Assets with Separation Portfolios to Lessen Total Risk
Apreda, Rodolfo - 2009
This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market … least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single … separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk …
Persistent link: https://www.econbiz.de/10013159871
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Arbitrage, Idiosyncratic Risk and the Rationality of Discounts on Closed-End Funds
Gemmill, Gordon - 2011
is an arbitrage cap on its premium resulting from new issues. This censors the distribution of the premium and causes its …
Persistent link: https://www.econbiz.de/10013128561
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Chapter 10 Arbitrage, state prices and portfolio theory
Dybvig, Philip H.; Ross, Stephen A. - 2003
equivalence of absence of arbitrage, the existence of a positive linear pricing rule, and the existence of an optimum for some …
Persistent link: https://www.econbiz.de/10014023861
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Global Political Risk and Currency Momentum
Filippou, Ilias - 2016
. Our results are robust after controlling for transaction costs, reversals and alternative limits to arbitrage. The global …
Persistent link: https://www.econbiz.de/10013005726
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Arbitrage Opportunity, Impossible Frontier, and Logical Circularity in CAPM Equilibrium
Abad, Pharos - 2020
Persistent link: https://www.econbiz.de/10012841039
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The pricing of unexpected volatility in the currency market
Lu, Wenna; Copeland, Laurence S.; Xu, Yongdeng - 2021
Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a Markov-switching model to price the excess returns from the currency carry trade. We show that the...
Persistent link: https://www.econbiz.de/10012591966
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FX liquidity risk and carry trade premia
Söderlind, Paul; Somogyi, Fabricius - 2022
The foreign exchange (FX) market is considered to be the largest and presumably most liquid financial market in the world. We show that even in this market exposure to liquidity risk commands a non-trivial risk premium of up to 3.6% per annum. In particular, systematic and currency-specific...
Persistent link: https://www.econbiz.de/10013252868
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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