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Precificação de ativos com risco no mercado acionário brasileiro: aplicação do modelo CAPM e variantes; Assets pricing in the Brazilian stock market: CAPM and variants application

Fonte: UNIVERSIDADE FEDERAL DE LAVRAS; DAE - Programa de Pós-graduação; UFLA; BRASIL Publicador: UNIVERSIDADE FEDERAL DE LAVRAS; DAE - Programa de Pós-graduação; UFLA; BRASIL
Tipo: Dissertação
Português
Relevância na Pesquisa
38.54363%

Design Options for an International Carbon Asset Reserve for the World

Fuessler, Juerg; Herren, Martin
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Trabalho em Andamento
Português
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This paper presents first concepts and insights on an International Carbon Asset Reserve. In particular, it explores how different design options can support a range of networked carbon pricing efforts. The report provides an overview of key risks in carbon markets, highlights the benefits of pooling risks on an aggregated scale, and identifies potential design options and structures for an international carbon asset reserve. The paper contributes to the wide effort to promote a long-term price on carbon and carbon market stabilization, comparability, and networking.

Financial contagion and asset pricing

Fry-McKibbin, Renee Anne; Martin, Vance L.; Tang, Chrismin
Fonte: CAMA, Australian National University Publicador: CAMA, Australian National University
Tipo: Working/Technical Paper Formato: 41 pages
Português
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38.601265%
Asset market interconnectedness can give rise to significant contagion risks during periods of financial crises that extend beyond the risks associated with changes in volatilities and correlation. These channels include the transmission of shocks operating through changes in the higher order comoments of asset returns, including changes in coskewness arising from changes in the interaction between volatility and average returns across asset markets. These additional contagion channels have nontrivial implications for the pricing of options through changes in the payoff probability structure and more generally, in the management of financial risks. The effects of incorrectly pricing risk has proved to be significant during many financial crises, including the subprime crisis from mid 2007 to mid 2008, the Great Recession beginning 2008 and the European debt crisis from 2010. Using an exchange options model, the effects of changes in the comoments of asset returns across asset markets are investigated with special emphasis given to understanding the effects on hedging risk during financial crises. The results reveal that by not correctly pricing the risks arising from higher order moments during financial crises, there is significant mispricing of options...

Creative Destruction and Asset Prices

Grammig, Joachim; Jank, Stephan
Fonte: Universidade de Tubinga Publicador: Universidade de Tubinga
Tipo: ResearchPaper
Português
Relevância na Pesquisa
47.620693%
We relate Schumpeter’s notion of creative destruction to asset pricing, thereby offering a novel explanation of size and value premia. We argue that small-value firms are more likely to be destroyed by serendipitous invention activity, and investors demand higher expected returns for bearing that risk. Large-growth stocks provide protection against creative destruction, so they receive expected return discounts. An ICAPM that accounts for creative destruction risk explains a considerable part of the cross-sectional return variation of size- and book-to-market-sorted portfolios. The estimated risk compensations associated with creative destruction are economically and statistically significant.

Heterogeneous Beliefs, Wealth Accumulation and Asset Price Dynamics

Cabrales, Antonio; Hoshi, Takeo
Fonte: Elsevier Publicador: Elsevier
Tipo: Artigo de Revista Científica Formato: application/pdf
Publicado em //1996 Português
Relevância na Pesquisa
47.74271%
This paper develops and analyzes a models of asset markets with two types of investors. We study the stochastic processes for the distribution of wealth between the two types of investors and for the equilibrium asset returns. The relationship between this model and some econometric models with time varying parameter, such as the ARCH(Autoregressive Conditional Heteroskedasticity) model, as well as the relationship between the volume of trade and volatility, are examined. The dynamic properties of another model, regarding investors who use strategies that are a bit more complex, are also analyzed.

From Boom 'til Bust : How Loss Aversion Affects Asset Prices; Journal of Banking and Finance

Berkelaar, Arjan; Kouwenberg, Roy
Fonte: Banco Mundial Publicador: Banco Mundial
Tipo: Journal Article; Journal Article
Português
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47.620693%
This article studies the impact of heterogeneous loss averse investors on asset prices. In very good states loss averse investors become gradually less risk averse as wealth rises above their reference point, pushing up equity prices. When wealth drops below the reference point the investors become risk seeking and demand for stocks increases drastically, eventually leading to a forced sell-off and stock market bust in bad states. Heterogeneity in reference points and initial wealth of the loss averse investors does not change the salient features of the equilibrium price process, such as a relatively high equity premium, high volatility and counter-cyclical changes in the equity premium.

Arbitrage-Based Pricing when Volatility is Stochastic.

Bossaerts, P.; Ghysels, E.; Gourieroux, C.
Fonte: Université de Montréal Publicador: Université de Montréal
Tipo: Artigo de Revista Científica Formato: 2019964 bytes; application/pdf
Português
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The paper investigates the pricing of derivative securities with calendar-time maturities.

Impact of the Level of Disclosure of Financial Information on the Pricing of Shares in the Context of Adverse Selection: an experimental research

Silva de Lima, Diogo Henrique; Rodrigues, Jomar Miranda; Tiburcio Silva, Cesar Augusto; Gomes da Silva, Jose Dionisio
Fonte: FUND ESCOLA COMERCIO ALVARES PENTEADO-FECAP; SAO PAULO SP Publicador: FUND ESCOLA COMERCIO ALVARES PENTEADO-FECAP; SAO PAULO SP
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
47.635063%
Managers know more about the performance of the organization than investors, which makes the disclosure of information a possible strategy for competitive differentiation, minimizing adverse selection. This paper's main goal is to analyze whether or not an entity's level of diclosure may affect the risk perception of individuals and the process of evaluating their shares. The survey was carried out in an experimental study with 456 subjects. In a stock market simulation, we investigated the pricing of the stocks of two companies with different levels of information disclosure at four separate stages. The results showed that, when other variables are constant, the level of disclosure of an entity can affect the expectations of individuals and the process of evaluating their shares. A higher level of disclosure by an entity affected the value of its share and the other company's.

Pricing options on illiquid assets with liquid proxies using utility indifference and dynamic-static hedging

Halperin, Igor; Itkin, Andrey
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 15/05/2012 Português
Relevância na Pesquisa
38.54363%
This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic while the Y-hedge is static. Using the indifference pricing approach we derive a HJB equation for the value function, and solve it analytically (in quadratures) using an asymptotic expansion around the limit of the perfect correlation between assets Y and Z. While in this paper we apply our framework to an incomplete market version of the credit-equity Merton's model, the same approach can be used for other asset classes (equity, commodity, FX, etc.), e.g. for pricing and hedging options with illiquid strikes or illiquid exotic options.; Comment: 34 pages, 10 figures, first presented at Global Derivatives USA, Chicago, 2011

Asset Pricing under uncertainty

Scotti, Simone
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 26/03/2012 Português
Relevância na Pesquisa
47.635063%
We study the effect of parameter uncertainty on a stochastic diffusion model, in particular the impact on the pricing of contingent claims, using methods from the theory of Dirichlet forms. We apply these techniques to hedging procedures in order to compute the sensitivity of SDE trajectories with respect to parameter perturbations. We show that this analysis can justify endogenously the presence of a bid-ask spread on the option prices. We also prove that if the stochastic differential equation admits a closed form representation then the sensitivities have closed form representations. We examine the case of log-normal diffusion and we show that this framework leads to a smiled implied volatility surface coherent with historical data.; Comment: arXiv admin note: substantial text overlap with arXiv:1001.5202

Instantaneous mean-variance hedging and instantaneous Sharpe ratio pricing in a regime-switching financial model, with applications to equity-linked claims

Delong, Łukasz; Pelsser, Antoon
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 17/03/2013 Português
Relevância na Pesquisa
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We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a multivariate counting process with stochastic intensities. The interest rate, drift, volatility and intensities fluctuate over time and, in particular, they depend on the state (regime) of the economy which is modelled by the multivariate counting process. Hence, we can allow for stressed market conditions. We assume that the trajectory of the risky asset is continuous between the transition times for the states of the economy and that the value of the risky asset jumps at the time of the transition. We find the hedging strategy which minimizes the instantaneous mean-variance risk of the hedger's surplus and we set the price so that the instantaneous Sharpe ratio of the hedger's surplus equals a predefined target. We use Backward Stochastic Differential Equations. Interestingly, the instantaneous mean-variance hedging and instantaneous Sharpe ratio pricing can be related to no-good-deal pricing and robust pricing and hedging under model ambiguity. We discuss key properties of the optimal price and the optimal hedging strategy. We also use our results to price and hedge mortality-contingent claims with financial components (equity-linked insurance claims) in a combined insurance and regime-switching financial model.

Option Pricing of Twin Assets

Villena, Marcelo J.; Araneda, Axel A.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 26/01/2014 Português
Relevância na Pesquisa
38.421616%
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index which is traded, for hedging purposes. Implicitly, traders assume here that the higher the correlation between the traded and nontraded assets, the better the hedge is expected to perform. This raises the question as to how \textquoteleft{}closely related\textquoteright{} the assets really are. In this paper, the concept of twin assets is introduced, focusing the discussion precisely in what does it mean for two assets to be similar. Our findings point to the fact that, in order to have very similar assets, for example identical twins, high correlation measures are not enough. Specifically, two basic criteria of similarity are pointed out: i) the coefficient of variation of the assets and ii) the correlation between assets. From here, a method to measure the level of similarity between assets is proposed, and secondly, an option pricing model of twin assets is developed. The proposed model allows us to price an option of one nontraded asset using its twin asset, but this time knowing explicitly what levels of errors we are facing. Finally...

Valuation of asset and volatility derivatives using decoupled time-changed L\'evy processes

Torricelli, Lorenzo
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
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In this paper we propose a general derivative pricing framework which employs decoupled time-changed (DTC) L\'evy processes to model the underlying asset of contingent claims. A DTC L\'evy process is a generalized time-changed L\'evy process whose continuous and pure jump parts are allowed to follow separate random time scalings; we devise the martingale structure for a DTC L\'evy-driven asset and revisit many popular models which fall under this framework. Postulating different time changes for the underlying L\'evy decomposition allows to introduce asset price models consistent with the assumption of a correlated pair of continuous and jump market activities; we study one illustrative DTC model having this property by assuming that the instantaneous activity rates follow the the so-called Wishart process. The theory developed is applied to the problem of pricing claims depending not only on the price or the volatility of an underlying asset, but also to more sophisticated derivatives that pay-off on the joint performance of these two financial variables, like the target volatility option (TVO). We solve the pricing problem through a Fourier-inversion method; numerical computations validating our technique are provided.; Comment: 30 Pages...

A Fourier transform method for spread option pricing

Hurd, T. R.; Zhou, Zhuowei
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 20/02/2009 Português
Relevância na Pesquisa
47.76011%
Spread options are a fundamental class of derivative contract written on multiple assets, and are widely used in a range of financial markets. There is a long history of approximation methods for computing such products, but as yet there is no preferred approach that is accurate, efficient and flexible enough to apply in general models. The present paper introduces a new formula for general spread option pricing based on Fourier analysis of the spread option payoff function. Our detailed investigation proves the effectiveness of a fast Fourier transform implementation of this formula for the computation of prices. It is found to be easy to implement, stable, efficient and applicable in a wide variety of asset pricing models.; Comment: 16 pages, 3 figures

Pricing formulas, model error and hedging derivative portfolios

Hurd, T. R.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 31/08/2001 Português
Relevância na Pesquisa
47.76011%
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic variations in the individual assets described by the formula. The paper makes simple and natural assumptions for how these risks behave. These extra risks should always be included when using the formula as a basis for portfolio management. We investigate an idealized typical portfolio problem, and argue that a rational and workable trading strategy can be based on minimizing the quadratic risk over the time intervals between trades. The example of the variance gamma pricing formula for equity derivatives is explored, and the method is seen to yield tractable decision strategies in this case.; Comment: 16 pages, 1 figure

Pricing Illiquid Options with $N+1$ Liquid Proxies Using Mixed Dynamic-Static Hedging

Halperin, I.; Itkin, A.
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 16/09/2012 Português
Relevância na Pesquisa
38.54363%
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset $Z$ using a set of proxies: a liquid asset $S$, and $N$ liquid European options $P_i$, each written on a liquid asset $Y_i, i=1,N$. We assume that the $S$-hedge is dynamic while the multi-name $Y$-hedge is static. Using the indifference pricing approach with an exponential utility, we derive a HJB equation for the value function, and build an efficient numerical algorithm. The latter is based on several changes of variables, a splitting scheme, and a set of Fast Gauss Transforms (FGT), which turns out to be more efficient in terms of complexity and lower local space error than a finite-difference method. While in this paper we apply our framework to an incomplete market version of the credit-equity Merton's model, the same approach can be used for other asset classes (equity, commodity, FX, etc.), e.g. for pricing and hedging options with illiquid strikes or illiquid exotic options.; Comment: 18 pages

New Pricing Framework: Options and Bonds

Laskin, Nick
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
38.396094%
A unified analytical pricing framework with involvement of the shot noise random process has been introduced and elaborated. Two exactly solvable new models have been developed. The first model has been designed to value options. It is assumed that asset price stochastic dynamics follows a Geometric Shot Noise motion. A new arbitrage-free integro-differential option pricing equation has been found and solved. The put-call parity has been proved and the Greeks have been calculated. Three additional new Greeks associated with market model parameters have been introduced and evaluated. It has been shown that in diffusion approximation the developed option pricing model incorporates the well-known Black-Scholes equation and its solution. The stochastic dynamic origin of the Black-Scholes volatility has been uncovered. The new option pricing model has been generalized based on asset price dynamics modeled by the superposition of Geometric Brownian motion and Geometric Shot Noise. To model stochastic dynamics of a short term interest rate, the second model has been introduced and developed based on Langevin type equation with shot noise. A new bond pricing formula has been obtained. It has been shown that in diffusion approximation the developed bond pricing formula goes into the well-known Vasicek solution. The stochastic dynamic origin of the long-term mean and instantaneous volatility of the Vasicek model has been uncovered. A generalized bond pricing model has been introduced and developed based on short term interest rate stochastic dynamics modeled by superposition of a standard Wiener process and shot noise. Despite the non-Gaussianity of probability distributions involved...

G-consistent price system and bid-ask pricing for European contingent claims under Knightian uncertainty

Chen, Wei
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
38.733447%
The target of this paper is to consider model the risky asset price on the financial market under the Knightian uncertainty, and pricing the ask and bid prices of the uncertain risk. We use the nonlinear analysis tool, i.e., G-frame work [26], to construct the model of the risky asset price and bid-ask pricing for the European contingent claims under Knightian uncertain financial market. Firstly, we consider the basic risky asset price model on the uncertain financial market, which we construct here is the model with drift uncertain and volatility uncertain. We describe such model by using generalized G-Brownian motion and call it as G-asset price system. We present the uncertain risk premium which is uncertain and distributed with maximum distribution. We derive the closed form of bid-ask price of the European contingent claim against the underlying risky asset with G-asset price system as the discounted conditional G-expecation of the claim, and the bid and ask prices are the viscosity solutions to the nonlinear HJB equations.Furthermore, we consider the main part of this paper, i.e., consider the risky asset on the Knightian uncertain financial market with the price fluctuation shows as continuous trajectories. We propose the G-conditional full support condition by using uncertain capacity...

Loan securitisation: default term structure and asset pricing based on loss prioritisation

Jobst, Andreas A.
Fonte: Financial Markets Group, London School of Economics and Political Science Publicador: Financial Markets Group, London School of Economics and Political Science
Tipo: Monograph; NonPeerReviewed Formato: application/pdf
Publicado em /08/2002 Português
Relevância na Pesquisa
38.458916%
Ambivalence in the regulatory definition of capital adequacy for credit risk has recently stirred the financial services industry to collateral loan obligations (CLOs) as an important balance sheet management tool. CLOs represent a specialised form of Asset-Backed Securitisation (ABS), with investors acquiring a structured claim on the interest proceeds generated from a portfolio of bank loans in the form of tranches with different seniority. By way of modelling Merton-type risk-neutral asset returns of contingent claims on a multi-asset portfolio of corporate loans in a CLO transaction, we analyse the optimal design of loan securitisation from the perspective of credit risk in potential collateral default. We propose a pricing model that draws on a careful simulation of expected loan loss based on parametric bootstrapping through extreme value theory (EVT). The analysis illustrates the dichotomous effect of loss cascading, as the most junior tranche of CLO transactions exhibits a distinctly different default tolerance compared to the remaining tranches. By solving the puzzling question of properly pricing the risk premium for expected credit loss, we explain the rationale of first loss retention as credit risk cover on the basis of our simulation results for pricing purposes under the impact of asymmetric information.

A theoretical and empirical study of asset securitisation: Risk modelling, security design and market pricing.

Jobst, Andreas Alexander
Fonte: London School of Economics and Political Science Thesis Publicador: London School of Economics and Political Science Thesis
Tipo: Thesis; NonPeerReviewed Formato: application/pdf
Publicado em //2005 Português
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Asset securitisation represents an alternative risk management and refinancing method, which allows issues to convert classifiable cash flows from a diversified portfolio of pre-existing assets and receivables (liquidity transformation and asset diversification process) of varying maturity and quality (integration and differentiation process) into negotiable capital market paper, so-called "asset-backed securities" (ABS). Over the recent past ambivalence in the definition of capital adequacy for credit risk has particularly facilitated the development of loan securitisation as a refined "regulatory arbitrage tool". However, as impending regulatory change shifts the prime objective of securitisation to the efficient management of economic capital, procedural and substantive aspects of asset securitisation warrant closer inspection. The dissertation presents a comprehensive examination of the risk modelling, asset selection, optimal security design and competitive market pricing of asset-backed securities. We first provide an overview of the main characteristics of asset securitisation and explain its attendant benefits and drawbacks, especially as they pertain to the refinancing of illiquid asset exposures, such as SME-related payment obligations. Subsequently...