Download or read book Asset Pricing Implications of the Volatility Term Structure written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: These implications are consistent with our empirical results. In the last part, we study the relationship between individual stock's volatility term structure and the stock's future return. We use a measure of stock's implied volatility term structure slope, defined as the difference between 3-month and 1-month implied volatility from at-the-money options, to demonstrate that option prices contain important information for the underlying equities. We show that option volatility term structure slopes are significant in explaining future equity returns in the cross-section. And we further find evidence that the implied volatility term structure is a measure of event risk: firms with the most negative volatility term structure are those for which the market anticipates news that may affect stock price within one month. Relevant events include, but are not limited to, earnings announcements.

Download or read book Asset Pricing Implications of Volatility Term Structure Risk written by Chen Xie and published by . This book was released on 2014 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: I find that stocks with high sensitivities to changes in the VIX slope exhibit high returns on average. The price of VIX slope risk is approximately 2.5% annually, statistically significant and cannot be explained by other common factors, such as the market excess return, size, book-to-market, momentum, liquidity, market volatility, and the variance risk premium. I provide a theoretical model that supports my empirical results. The model extends current rare disaster models to include disasters of different lengths. My model implies that a downward sloping VIX term structure anticipates a potential long disaster and vice versa.

Download or read book Equilibrium Implications of Real Option Positions on the Term Structure of Interest Rates Asset Prices and Portfolio Choice written by Carles Vergara-Alert and published by . This book was released on 2008 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monetary Policy Rules and the Term Structure of Interest Rates written by Shu Wu and published by . This book was released on 2000 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Ambiguity and Volatility written by Beatrice Pataracchia and published by . This book was released on 2011 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Prices Booms and Recessions written by Willi Semmler and published by Springer Science & Business Media. This book was released on 2011-06-15 with total page 327 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial market melt-down of the years 2007-2009 has posed great challenges for studies on financial economics. This financial economics text focuses on the dynamic interaction of financial markets and economic activity. The financial market to be studied here encompasses the money and bond market, credit market, stock market and foreign exchange market; economic activity includes the actions and interactions of firms, banks, households, governments and countries. The book shows how economic activity affects asset prices and the financial market, and how asset prices and financial market volatility and crises impact economic activity. The book offers extensive coverage of new and advanced topics in financial economics such as the term structure of interest rates, credit derivatives and credit risk, domestic and international portfolio theory, multi-agent and evolutionary approaches, capital asset pricing beyond consumption-based models, and dynamic portfolio decisions. Moreover a completely new section of the book is dedicated to the recent financial market meltdown of the years 2007-2009. Emphasis is placed on empirical evidence relating to episodes of financial instability and financial crises in the U.S. and in Latin American, Asian and Euro-area countries. Overall, the book explains what researchers and practitioners in the financial sector need to know about the financial-real interaction, and what practitioners and policy makers need to know about the financial market.

Download or read book Testing the Term Structure Implications of an Intertemporal Asset Pricing Model Using Argentine Data written by Leonardo Leiderman and published by . This book was released on 1984 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Common Factor in Idiosyncratic Volatility written by Bernard Herskovic and published by . This book was released on 2014 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that firms' idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 6.4% per year higher than those in the highest quintile. We provide evidence that the CIV factor is correlated with income risk faced by households. These three facts are consistent with a canonical incomplete markets heterogeneous-agent model. In the model, CIV is a priced state variable because an increase in idiosyncratic firm volatility raises the typical investor's marginal utility when markets are incomplete. The calibrated model matches the high degree of comovement in idiosyncratic volatilities, the CIV-beta return spread, and several other asset price moments.

Download or read book Essays on the Term Structure of Volatility and Option Returns written by Vincent Campasano and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The first essay studies the dynamics of equity option implied volatility and shows that they depend both upon the option's time to maturity (horizon) and slope of the implied volatility term structure for the underlying asset (term struc ture). We propose a simple, illustrative framework which intuitively captures these dynamics. Guided by our framework, we examine a number of volatility trading strategies across horizon, and the extent to which profitability of trading strategies is due to an interaction between term structure and realized volatility. While profitable trading strategies based upon term structure exist for both long and short horizon options, this interaction requires that positions in long horizon options be very different than those required for short horizon options. Equity option returns depend upon both term structure and horizon, but for index options, implied volatility term structure slope negatively predicts returns. While the carry trade has been applied profitably across asset classes and to index v volatility, given this difference in index and equity implied volatility dynamics, I examine the carry trade in the equity volatility market in the second essay. I show that the carry trade in equity volatility produces significant returns, and unlike the returns to carry in other asset classes, is not exposed to liquidity or volatility risks and negatively loads on market risk. A long volatility carry portfolio, after transactions costs, remains significantly profitable and negatively loads on market risks, challenging traditional asset pricing theories. Overwriting an index position with call options creates a portfolio with fixed exposures to market and volatility risk premia. I allow for time-varying allocations to volatility and the market by conditioning on the slope of the implied volatility term structure. I show that a three asset portfolio holding a VIX futures position, the SandP 500 Index and cash triples the returns of the index and more than doubles the risk-adjusted returns of the covered call while maintaining a return volatility roughly equal to that of the SandP 500 Index.

Download or read book The Term Structure of the Price of Variance Risk written by Marianne Andries and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate the term structure of the price of variance risk (PVR), which helps distinguish between competing asset-pricing theories. First, we measure the PVR as proportional to the Sharpe ratio of short-term holding returns of delta-neutral index straddles; second, we estimate the PVR in a Heston (1993) stochastic-volatility model. In both cases, the estimation is performed separately for different maturities. We find the PVR is negative and decreases in absolute value with maturity; it is more negative and its term structure is steeper when volatility is high. These findings are inconsistent with calibrations of established asset-pricing models that assume constant risk aversion across maturities.

Download or read book Excess Volatility and the Asset Pricing Exchange Rate Model with Unobservable Fundamentals written by Lorenzo Giorgianni and published by International Monetary Fund. This book was released on 1999-05 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a method to test the volatility predictions of the textbook asset-pricing exchange rate model, which imposes minimal structure on the data and does not commit to a choice of exchange rate “fundamentals.” Our method builds on existing tests of excess volatility in asset prices, combining them with a procedure that extracts unobservable fundamentals from survey-based exchange rate expectations. We apply our method to data for the three major exchange rates since 1984 and find broad evidence of excess exchange rate volatility with respect to the predictions of the canonical asset-pricing model in an efficient market.

Download or read book Advances Innovations in the Bond and Mortgage Markets written by Frank J. Fabozzi and published by Irwin Professional Publishing. This book was released on 1989 with total page 684 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing Model Specification and the Term Structure Evidence written by Terry A. Marsh and published by . This book was released on 1985 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Structural Stochastic Volatility in Asset Pricing Dynamics written by Reiner Franke and published by . This book was released on 2011 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Volatility Surface written by Jim Gatheral and published by . This book was released on 2006 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.

Download or read book Asymptotic Theory for Econometricians written by Halbert White and published by Academic Press. This book was released on 2014-06-28 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is intended to provide a somewhat more comprehensive and unified treatment of large sample theory than has been available previously and to relate the fundamental tools of asymptotic theory directly to many of the estimators of interest to econometricians. In addition, because economic data are generated in a variety of different contexts (time series, cross sections, time series--cross sections), we pay particular attention to the similarities and differences in the techniques appropriate to each of these contexts.