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Estimação do CAPM intertemporal com ações da BOVESPA; Intertemporal CAPM estimation with Bovespa stocks

Almeida, Leandro de Oliveira
Fonte: Biblioteca Digitais de Teses e Dissertações da USP Publicador: Biblioteca Digitais de Teses e Dissertações da USP
Tipo: Dissertação de Mestrado Formato: application/pdf
Publicado em 05/04/2010 Português
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Esse trabalho se propõe a estimar um modelo de apreçamento de ativos de capital financeiro intertemporal, em inglês, intertemporal capital asset pricing model ICAPM, utilizando as inovações produzidas de duas variáveis de estado: o índice máximo de Sharpe e a taxa real de juros. Tais variáveis são supostas formadas a partir de um processo de difusão de reversão à média: Ornstein-Uhlenbeck. A estimação do modelo completo, ICAPM, é feita no arcabouço de cross-section e comparada com a estimação do modelo de três fatores de Fama-French, tanto em retornos mensais quanto semanais. O modelo ICAPM não mostrou um grau de ajuste melhor que o modelo de Fama-French.; This work intends to estimate an intertemporal capital asset pricing model, by using the innovations of two state variables: maximum Sharpe index and real interest rate. These variables are supposed created by a mean reverting diffusion process: Ornstein-Uhlenbeck. The complete estimation of ICAPM is made in a cross-section approach and it is compared with Fama-French three factors model, as in monthly return as weekly return. ICAPM model does not have a better goodness of fit than Fama-French Model.

Testing option pricing with the Edgeworth expansion

Balieiro, R. G.; Rosenfeld, Rogério
Fonte: Elsevier B.V. Publicador: Elsevier B.V.
Tipo: Artigo de Revista Científica Formato: 484-490
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There is a well-developed framework, the Black-Scholes theory, for the pricing of contracts based on the future prices of certain assets, called options. This theory assumes that the probability distribution of the returns of the underlying asset is a Gaussian distribution. However, it is observed in the market that this hypothesis is flawed, leading to the introduction of a fudge factor, the so-called volatility smile. Therefore, it would be interesting to explore extensions of the Black-Scholes theory to non-Gaussian distributions. In this paper, we provide an explicit formula for the price of an option when the distributions of the returns of the underlying asset is parametrized by an Edgeworth expansion, which allows for the introduction of higher independent moments of the probability distribution, namely skewness and kurtosis. We test our formula with options in the Brazilian and American markets, showing that the volatility smile can be reduced. We also check whether our approach leads to more efficient hedging strategies of these instruments. (C) 2004 Elsevier B.V. All rights reserved.

The price of risk and ambiguity in an intertemporal general equilibrium model of asset prices

Gonçalo Faria; João Correia-da-Silva
Fonte: Universidade do Porto Publicador: Universidade do Porto
Tipo: Artigo de Revista Científica
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We consider a version of the intertemporal general equilibrium model of Cox et al. (Econometrica 53:363384, 1985) with a single production process and two correlated state variables. It is assumed that only one of them, Y2, has shocks correlated with those of the economy#8217;s output rate and, simultaneously, that the representative agent is ambiguous about its stochastic process. This implies that changes in Y2 should be hedged and its uncertainty priced, with this price containing risk and ambiguity components. Ambiguity impacts asset pricing through two channels: the price of uncertainty associated with the ambiguous state variable, Y2, and the interest rate. With ambiguity, the equilibrium price of uncertainty associated with Y2 and the equilibrium interest rate can increase or decrease, depending on: (i) the correlations between the shocks in Y2 and those in the output rate and in the other state variable; (ii) the diffusion functions of the stochastic processes for Y2 and for the output rate; and (iii) the gradient of the value function with respect to Y2. As applications of our generic setting, we deduct the model of Longstaff and Schwartz (J Financ 47:12591282, 1992) for interest-rate-sensitive contingent claim pricing and the variance-risk price specification in the option pricing model of Heston (Rev Financ Stud 6:327343...

Are Idiosyncratic Skewness and Idiosyncratic Kurtosis Priced?

Cao, Xu
Fonte: Brock University Publicador: Brock University
Tipo: Electronic Thesis or Dissertation
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This thesis investigates the pricing effects of idiosyncratic moments. We document that idiosyncratic moments, namely idiosyncratic skewness and idiosyncratic kurtosis vary over time. If a factor/characteristic is priced, it must show minimum variation to be correlated with stock returns. Moreover, we can identify two structural breaks in the time series of idiosyncratic kurtosis. Using a sample of US stocks traded on NYSE, AMEX and NASDAQ markets from January 1970 to December 2013, we run Fama-MacBeth test at the individual stock level. We document a negative and significant pricing effect of idiosyncratic skewness, consistent with the finding of Boyer et al. (2010). We also report that neither idiosyncratic volatility nor idiosyncratic kurtosis are consistently priced. We run robustness tests using different model specifications and period sub-samples. Our results are robust to the different factors and characteristics usually included in the Fama-MacBeth pricing tests. We also split first our sample using endogenously determined structural breaks. Second, we divide our sample into three equal sub-periods. The results are consistent with our main findings suggesting that expected returns of individual stocks are explained by idiosyncratic skewness. Both idiosyncratic volatility and idiosyncratic kurtosis are irrelevant to asset prices at the individual stock level. As an alternative method...

Innovations in Bankruptcy—Pricing the Priority of Insolvency Claims

Leechor, Chad
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
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Following the wave of recent financial turmoil, many developing countries have learned the value of an effective bankruptcy system in deterring excessive use of debt and providing an orderly way to resolve a debt crisis. As a result, they are now reforming their bankruptcy systems, generally modeling them on those of advanced countries. But there is dissatisfaction with bankruptcy frameworks in advanced countries too. Some alternatives have been proposed. One is an options-based approach that provides an objective way of pricing creditor claims according to priority. With allowances for local conditions, this approach offers developing countries a chance to leapfrog existing bankruptcy practices and their limitations. Effective bankruptcy systems have implications for corporate governance and for securities markets. For corporate managers and controlling shareholders, the cost of bankruptcy includes the loss of corporate control and the risk of personal liability. This threat serves as a restraint on the use of debt. In the event of default an efficient and orderly transfer of corporate control to creditors reduces the likelihood of asset stripping and looting by insiders. For creditors...

Option pricing and filtering with hidden Markov-Modulated pure-jump processes

Elliott, R.; Siu, T.
Fonte: Routledge Publicador: Routledge
Tipo: Artigo de Revista Científica
Publicado em //2013 Português
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This article discusses the pricing of derivatives in a continuous-time, hidden Markov-modulated, pure-jump asset price model. The hidden Markov chain modulating the pure-jump asset price model describes the evolution of the hidden state of an economy over time. The market model is incomplete. We employ a version of the Esscher transform to select a price kernel for valuation. We derive a valuation formula for European options using a Fourier transform and the correlation theorem. This formula depends on the hidden Markov chain. It is then estimated using a robust filter of the chain.; Robert J. Elliott & Tak Kuen Siu

Are Idiosyncratic Skewness and Idiosyncratic Kurtosis Priced?

Cao, Xu
Fonte: Brock University Publicador: Brock University
Tipo: Electronic Thesis or Dissertation
Português
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38.138633%
This thesis investigates the pricing effects of idiosyncratic moments. We document that idiosyncratic moments, namely idiosyncratic skewness and idiosyncratic kurtosis vary over time. If a factor/characteristic is priced, it must show minimum variation to be correlated with stock returns. Moreover, we can identify two structural breaks in the time series of idiosyncratic kurtosis. Using a sample of US stocks traded on NYSE, AMEX and NASDAQ markets from January 1970 to December 2013, we run Fama-MacBeth test at the individual stock level. We document a negative and significant pricing effect of idiosyncratic skewness, consistent with the finding of Boyer et al. (2010). We also report that neither idiosyncratic volatility nor idiosyncratic kurtosis are consistently priced. We run robustness tests using different model specifications and period sub-samples. Our results are robust to the different factors and characteristics usually included in the Fama-MacBeth pricing tests. We also split first our sample using endogenously determined structural breaks. Second, we divide our sample into three equal sub-periods. The results are consistent with our main findings suggesting that expected returns of individual stocks are explained by idiosyncratic skewness. Both idiosyncratic volatility and idiosyncratic kurtosis are irrelevant to asset prices at the individual stock level. As an alternative method...

Pricing, hedging and testing risky assets in financial markets

Ren, Yu
Fonte: Quens University Publicador: Quens University
Tipo: Tese de Doutorado Formato: 873974 bytes; application/pdf
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State price density (SPD) and stochastic discount factor (SDF) are important elements in asset pricing. In this thesis, I first propose to use projection pursuit regression (PPR) and local polynomial regression (LPR) to estimate the SPD of interest rates nonparametrically. By using a similar approach, I also estimate the delta values in the interest rate options and discusses how to delta-hedge these options. Unlike SPD measured in a risk-neutral economy, SDF is implied by an asset pricing model. It displays which prices are reasonable given the returns in the current period. Hansen and Jagannathan (1997) develop the Hansen-Jagannathan distance (HJ-distance) to measure pricing errors produced by SDF. While the HJ-distance has several desirable properties, Ahn and Gadarowski (2004) find that the specification test based on the HJ-distance overrejects correct models too severely in commonly used sample size to provide a valid test. This thesis proposes to improve the finite sample properties of the HJ-distance test by applying the shrinkage method (Ledoit and Wolf, 2003) to compute its weighting matrix.; Thesis (Ph.D, Economics) -- Queen's University, 2008-06-19 00:00:55.996

Option pricing, stochastic volatility, singular dynamics and constrained path integrals

Hojman Guiñerman, Sergio Andrés; Contreras, Mauricio
Fonte: Elsevier Publicador: Elsevier
Tipo: Artículo de revista
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Artículo de publicación ISI; Stochastic volatility models have been widely studied and used in the financial world. The Heston model (Heston, 1993) [7] is one of the best known models to deal with this issue. These stochastic volatility models are characterized by the fact that they explicitly depend on a correlation parameter ρ which relates the two Brownian motions that drive the stochastic dynamics associated to the volatility and the underlying asset. Solutions to the Heston model in the context of option pricing, using a path integral approach, are found in Lemmens et al. (2008) [21] while in Baaquie (2007,1997) [12,13] propagators for different stochastic volatility models are constructed. In all previous cases, the propagator is not defined for extreme cases ρ = ±1. It is therefore necessary to obtain a solution for these extreme cases and also to understand the origin of the divergence of the propagator. In this paper we study in detail a general class of stochastic volatility models for extreme values ρ = ±1 and show that in these two cases, the associated classical dynamics corresponds to a system with second class constraints, which must be dealt with using Dirac’s method for constrained systems (Dirac...

Pricing Derivatives on Multiscale Diffusions: an Eigenfunction Expansion Approach

Lorig, Matthew
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
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Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent. Additionally, the process underlying the derivative may exhibit killing (i.e. jump to default) as well as combined local/nonlocal stochastic volatility. The nonlocal component of volatility is multiscale, in the sense that it is driven by one fast-varying and one slow-varying factor. The flexibility of our modeling framework is contrasted by the simplicity of our method. We reduce the derivative pricing problem to that of solving a single eigenvalue equation. Once the eigenvalue equation is solved, the approximate price of a derivative can be calculated formulaically. To illustrate our method, we calculate the approximate price of three derivative-assets: a vanilla option on a defaultable stock, a path-dependent option on a non-defaultable stock, and a bond in a short-rate model.

On the pricing and hedging of options for highly volatile periods

El-Khatib, Youssef; Hatemi-J, Abdulnasser
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 17/04/2013 Português
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Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the unconditional volatility of the original asset is increasing during a certain period of time. We consider a market suffering from a financial crisis. We provide the solution for the equation of the underlying asset price as well as finding the hedging strategy. In addition, a closed formula of the pricing problem is proved for a particular case. The suggested formulas are expected to make the valuation of options and the underlying hedging strategies during financial crisis more precise.

Pricing joint claims on an asset and its realized variance under stochastic volatility models

Torricelli, Lorenzo
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 11/06/2012 Português
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In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims paying off at maturity a joint function of the underlying and its realised volatility/variance. We study the solution under different stochastic volatility models, give a formula for the computation of the Delta and Gamma of these claims, and introduce some new interesting payoffs that can be priced through this equation. Numerical results are given and compared to those from plain vanilla derivatives.; Comment: 13 pages, 5 Tables. Part of the material was presented at Santander monthly seminar in quantitative finance, London, January 2011

One-Dimensional Pricing of CPPI

Paulot, Louis; Lacroze, Xavier
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
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Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must be quantified. CPPI strategies are path-dependent and may have American exercise which makes their valuation complex. A naive description of the state of the portfolio would involve three or even four variables. In this paper we prove that the system can be described as a discrete-time Markov process in one single variable if the underlying asset follows a homogeneous process. This yields an efficient pricing scheme using transition probabilities. Our framework is flexible enough to handle most features of traded CPPIs including profit lock-in and other kinds of strategies with discrete-time reallocation.; Comment: 19 pages; v2: improved algorithm, error analysis

An alternative proof of a result of Takaoka

Song, Shiqi
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 05/06/2013 Português
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In Karatzas and Kardaras's paper on semimartingale financial models, it is proved that the NUPBR condition is a property of the local characteristic of the asset process alone. In Takaoka's paper on NUPBR, it is proved that the NUPBR condition is equivalent to the existence of a simga-martingale deflator. However, Takaoka's paper founds its proof on Delbaen and Schachermayer's fundamental asset pricing theorem, i.e. the NFLVR condition, which is not a pure property of the local characteristic of the asset process. In this paper we give an alternative proof of the result of Takaoka, which makes use only the properties of the local characteristic of the asset process.

Pricing Options in Incomplete Equity Markets via the Instantaneous Sharpe Ratio

Bayraktar, Erhan; Young, Virginia R.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
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We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a pre-specified instantaneous Sharpe ratio. First, we apply our method to price options on non-traded assets for which there is a traded asset that is correlated to the non-traded asset. Our main contribution to this particular problem is to show that our seller/buyer prices are the upper/lower good deal bounds of Cochrane and Sa\'{a}-Requejo (2000) and of Bj\"{o}rk and Slinko (2006) and to determine the analytical properties of these prices. Second, we apply our method to price options in the presence of stochastic volatility. Our main contribution to this problem is to show that the instantaneous Sharpe ratio, an integral ingredient in our methodology, is the negative of the market price of volatility risk, as defined in Fouque, Papanicolaou, and Sircar (2000).; Comment: Keywords: Pricing derivative securities, incomplete markets, Sharpe ratio, correlated assets, stochastic volatility, non-linear partial differential equations, good deal bounds

Efficient price dynamics in a limit order market: an utility indifference approach

Fukasawa, Masaaki
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 29/10/2014 Português
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We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the efficient price, that is, the asset price when a representative liquidity demander follows an optimal strategy. We show that a Pareto efficient allocation is achieved under a completeness condi- tion. We give an explicit representation of the efficient price for several examples. In particular, we observe that the volatility of the asset depends on the convexity of an initial endowment. Further, we observe that an asset price crash is invoked by an endowment shock. We establish a dynamic programming principle under an incomplete framework.

An exact and explicit formula for pricing lookback options with regime switching

Chan, Leunglung; Zhu, Song-Ping
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 17/07/2014 Português
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This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the volatility of the underlying risky asset depend on unobservable states of the economy described by a continuous-time hidden Markov chain process. We derive an exact, explicit and closed-form solution for European-style lookback options in a two-state regime switching model.

An exact and explicit formula for pricing Asian options with regime switching

Chan, Leunglung; Zhu, Song-Ping
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 17/07/2014 Português
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This paper studies the pricing of European-style Asian options when the price dynamics of the underlying risky asset are assumed to follow a Markov- modulated geometric Brownian motion; that is, the appreciation rate and the volatility of the underlying risky asset depend on unobservable states of the economy described by a continuous-time hidden Markov process. We derive the exact, explicit and closed-form solutions for European-style Asian options in a two-state regime switching model.; Comment: arXiv admin note: substantial text overlap with arXiv:1407.4864

Essays on the Econometrics of Option Prices

Vogt, Erik
Fonte: Universidade Duke Publicador: Universidade Duke
Tipo: Dissertação
Publicado em //2014 Português
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This dissertation develops new econometric techniques for use in estimating and conducting inference on parameters that can be identified from option prices. The techniques in question extend the existing literature in financial econometrics along several directions.

The first essay considers the problem of estimating and conducting inference on the term structures of a class of economically interesting option portfolios. The option portfolios of interest play the role of functionals on an infinite-dimensional parameter (the option surface indexed by the term structure of state-price densities) that is well-known to be identified from option prices. Admissible functionals in the essay are generalizations of the VIX volatility index, which represent weighted integrals of options prices at a fixed maturity. By forming portfolios for various maturities, one can study their term structure. However, an important econometric difficulty that must be addressed is the illiquidity of options at longer maturities, which the essay overcomes by proposing a new nonparametric framework that takes advantage of asset pricing restrictions to estimate a shape-conforming option surface. In a second stage, the option portfolios of interest are cast as functionals of the estimated option surface...

Option pricing for a logstable asset price model

Hurst, Stephanie; Platen, Eckhard; Racherla, Deepti
Fonte: Pergamon-Elsevier Ltd Publicador: Pergamon-Elsevier Ltd
Tipo: Artigo de Revista Científica
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The paper generalises the celebrated Black and Scholes [1] European option pricing formula for a class of logstable asset price models. The theoretical option prices have the potential to explain the implied volatility smiles evident in the market.