Essays In Empirical Option Stock And Bond Pricing

Download Essays In Empirical Option Stock And Bond Pricing full books in PDF, epub, and Kindle. Read online Essays In Empirical Option Stock And Bond Pricing ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!

Essays in Empirical Option, Stock, and Bond Pricing

Author :
Publisher :
ISBN 13 :
Total Pages : 266 pages
Book Rating : 4.:/5 (884 download)

DOWNLOAD NOW!

Book Synopsis Essays in Empirical Option, Stock, and Bond Pricing by :

Download or read book Essays in Empirical Option, Stock, and Bond Pricing written by and published by . This book was released on 2014 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies asset prices empirically in option, stock, and bond markets. Chapter 1 examines stock options in the context of stock-market momentum, dynamic (crash-resistant) momentum, and short-run reversals. In contrast to standard option-pricing theory, option prices are a function of past returns: relative to puts, calls become expensive when past returns predict high future returns and vice versa, indicating buying pressure to exploit predictability in the underlying. This price pressure varies with investor sophistication: sophisticated investors trade significantly on the momentum strategies, which supports a view of momentum as mispricing with favorable risk-reward trade-offs. Less sophisticated investors trade momentum and reversals, but not dynamic momentum. Despite its relation to past returns, option buying pressure predicts future stock returns separately from the analyzed strategies. In option markets, reversals are only profitable before transaction costs and dynamic momentum yields the highest profits after costs. Chapter 2 studies composite measures of stock-market liquidity which are calculated to capture the commonality across nine individual liquidity measures. As a stock characteristic, composite liquidity is priced cross-sectionally, and most individual measures are not priced in addition. While five-factor models with Pastor and Stambaugh (2003) or Sadka (2006) liquidity factors are insufficient to explain the returns of composite liquidity sorted portfolios, the liquidity factor developed in this paper describes the distribution of composite liquidity sorted returns well. Comparing composite liquidity characteristics and factor loadings, however, the characteristics bear the stronger relation to returns. Chapter 3 studies the effects of ETF holdings and trades on corporate bond prices and liquidity. ETF trades impact bond prices by around five basis points per $1 million traded, which is symmetric for buys and sells, and partially reverses after the trade. The study finds mixed results for corporate bond liquidity, studied around a natural experiment of exogenous changes in ETF holdings: effective spreads and Bao, Pan, and Wang's (2011) gamma are mostly increasing in ETF holdings. In contrast, trade-direction-indicator-variable regressions indicate that a negative relation between ETF holdings and the noninformation component of the spread dominates a small but positive relation with the information component of the spread.

Three Essays in Empirical Asset Pricing

Author : Stephen Szaura
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

DOWNLOAD NOW!

Book Synopsis Three Essays in Empirical Asset Pricing by : Stephen Szaura

Download or read book Three Essays in Empirical Asset Pricing written by Stephen Szaura and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis comprises three essays in empirical asset pricing. My first essay entitled "Are stock and corporate bond markets integrated? A Big Data Approach" I document the existence a growing Factor Zoo of discovered characteristics and factors that predict the cross-section of corporate bond returns and generate a significant high minus low portfolio alpha. I determine a higher statistical benchmark, by accounting for those characteristics and factors that have been discovered in published and working papers and find that in cross-sectional regressions and portfolio sorts of over a hundred characteristics and factors, on average 2.4% predict the cross-section of corporate bond returns when adjusting for higher benchmarks. A multivariate horse-race of all characteristics and factors in cross-sectional regressions finds a higher number of corporate bond, rather than stock, characteristics and factors that predict the cross-section of corporate bond returns when adjusting for higher benchmarks. In addition to the lower number of corporate bond characteristics and factors that predict the cross-section of stock returns, my results show that the stock and corporate bond markets are more segmented than previously documented.My second essay is based on a joint working paper entitled "Do Option Implied Measures of Stock Mispricing Find Investment Opportunities or Market Frictions" where we find that existing option implied stock mis-pricing measures, the portfolios identified as being the most mispriced (highest quintile), typically have the highest shorting fee. When those stocks are omitted, the average abnormal returns of the long-short stock portfolios are insignificant or greatly reduced in economic magnitude. We propose a new measure, IPD, using a novel intra-day options trades data set, circumvents this and does not require shorting hard to borrow firms.My third essay is based on a joint working paper entitled "Accounting Transparency and the Implied Volatility Skew". We show theoretically and empirically that firms with higher accounting transparency have an implied volatility smirk that is more sensitive to leverage (vice versa). The more clear the accounting information the more skewed the implied volatility smirk. Our theoretical predictions rely on extending the Duffie and Lando [2001] credit risk model to stock option pricing whereby incomplete accounting information and the risk of bankruptcy together act as an economic source of jump risk for stocks. Empirical tests confirm the theoretical predictions of the model and the model can be solved in closed form solution up to Bivariate Standard Normal Cumulative Distribution Function"--

Three Essays in Empirical Asset Pricing

Author : Alessio Alberto Saretto
Publisher :
ISBN 13 :
Total Pages : 322 pages
Book Rating : 4.:/5 ( download)

DOWNLOAD NOW!

Book Synopsis Three Essays in Empirical Asset Pricing by : Alessio Alberto Saretto

Download or read book Three Essays in Empirical Asset Pricing written by Alessio Alberto Saretto and published by . This book was released on 2006 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Three Essays on Empirical Asset Pricing

Author : Fei Fang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (112 download)

DOWNLOAD NOW!

Book Synopsis Three Essays on Empirical Asset Pricing by : Fei Fang

Download or read book Three Essays on Empirical Asset Pricing written by Fei Fang and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on empirical asset pricing, including stock and options pricing. In the first and third chapter, we examine the linkage between stock market and options market at firm level. In Chapter Two, we documents the impact that systematic variance risk has for option prices of individual stocks. In the first chapter, we study the relation between future stock returns and option-based measures. We find that the options-based measure - future stock return relation is strongest for relatively less liquid stocks. After taking transaction costs into consideration, the risk-adjusted returns of the long-short stock portfolios do not differ significantly between stock liquidity groups. This chapter provides better understanding on the options-based stock return predictability. In the second chapter, we construct novel factors to mimic variance risk related to firm characteristics using individual stocks' variance risk premium. We then document that market variance risk premium and variance risk mimicking factors have strong explanatory power for option prices. Our new analytic framework links the variance risk factors related to firm characteristics to the individual equity option price structure. In the third chapter, we provide additional empirical results on how stock price can affect option prices. Our preliminary results reveal a link between the informational inefficiency of stock price and option prices. We find that a greater departure from random walk leads to a lower level of implied volatility (compared to realized volatility) and a steeper implied volatility curve.

Essays on Stock Options

Author : Iskra Kalodera
Publisher : Tectum - Der Wissenschaftsverlag
ISBN 13 : 9783828889026
Total Pages : 116 pages
Book Rating : 4.8/5 (89 download)

DOWNLOAD NOW!

Book Synopsis Essays on Stock Options by : Iskra Kalodera

Download or read book Essays on Stock Options written by Iskra Kalodera and published by Tectum - Der Wissenschaftsverlag. This book was released on 2011-07 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses exclusively on stock options, analyzing their pricing, liquidity, and information transmission empirically. With the help of discrete choice modeling and regression analysis, it offers new insights into the behavior of stock option liquidity as well as the influence of overall market liquidity on option prices. Many observed phenomena find explanation through the market microstructure. The book also provides the most comprehensive analysis of equity options for the German market so far and serves as a guide to up-to-date empirical topics for both researchers and practitioners.

Essays in Empirical Option Pricing and Risk Management

Author : Janis Bauer
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (119 download)

DOWNLOAD NOW!

Book Synopsis Essays in Empirical Option Pricing and Risk Management by : Janis Bauer

Download or read book Essays in Empirical Option Pricing and Risk Management written by Janis Bauer and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Three Essays in Asset Pricing

Author : Mehdi Karoui
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (921 download)

DOWNLOAD NOW!

Book Synopsis Three Essays in Asset Pricing by : Mehdi Karoui

Download or read book Three Essays in Asset Pricing written by Mehdi Karoui and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis consists of three essays that explore alternative approaches to extracting information from option data, and, along somewhat different lines, examine the channels through which liquidity is priced in equity options.The first essay proposes a novel approach to extracting option-implied equity premia, and empirically examines the information content of these risk premia for forecasting the stock market return. Our approach does not require specifying the functional form of the pricing kernel, and does not impose any restrictions on investors' preferences. We only assume the existence of put and call options which complete the market, and show that the implied equity premium can be inferred from expected excess returns on a portfolio of options. An empirical investigation of S&P 500 index options yields the following conclusions: (i) the implied equity premium predicts stock market returns; (ii) the implied equity premium consistently outperforms variables commonly used in the forecasting literature both in- and out-of-sample; (iii) the implied equity premium is positively related to future returns and negatively related to current returns, as theoretically expected.The second essay studies the effect of illiquidity on equity option returns. Illiquidity is well-known to be a significant determinant of stock and bond returns. We are the first to report on illiquidity premia in equity option markets using a large cross-section of firms. An increase in option illiquidity decreases the current option price and predicts higher expected delta-hedged option returns. This effect is statistically and economically significant, and it is consistent with existing evidence that market makers in the equity options market hold net long positions. The illiquidity premium is robust across puts and calls, across maturities and moneyness, as well as across different empirical approaches. It is also robust when controlling for various firm-specific variables including a standard measure of illiquidity of the underlying stock. For long term options, we find evidence of a liquidity risk factor. In the third essay, we demonstrate that in multifactor asset pricing models, prices of risk for factors that are nonlinear functions of the market return can be readily obtained using data on index returns and index options. We apply this general result to the measurement of the conditional price of coskewness and cokurtosis risk. The price of coskewness risk corresponds to the spread between the physical and the risk-neutral second moments, and the price of cokurtosis risk corresponds to the spread between the physical and the risk-neutral third moments. Estimates of these prices of risk have the expected sign, and they lead to reasonable risk premia. An out-of-sample analysis of factor models with coskewness and cokurtosis risk indicates that the new estimates of the price of risk improve the models. performance. The models also robustly outperform competitors such as the CAPM and the Fama-French model." --

Empirical Essays on Option-implied Information and Asset Pricing

Author : Fu, Xi
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (16 download)

DOWNLOAD NOW!

Book Synopsis Empirical Essays on Option-implied Information and Asset Pricing by : Fu, Xi

Download or read book Empirical Essays on Option-implied Information and Asset Pricing written by Fu, Xi and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Information Content of Options

Author : Yonatan Navon
Publisher :
ISBN 13 :
Total Pages : 382 pages
Book Rating : 4.:/5 (11 download)

DOWNLOAD NOW!

Book Synopsis The Information Content of Options by : Yonatan Navon

Download or read book The Information Content of Options written by Yonatan Navon and published by . This book was released on 2014 with total page 382 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this thesis is to examine the information content of stock options in financial markets. A key question in financial economics is how information diffuses across markets and how quickly it is reflected in security prices. This thesis aims at exploring this question by investigating the informational role that options play in financial markets. This is achieved by exploring the joint cross section of option and bond prices, the informational role of options in seasoned equity offerings (SEOs), and the information content of options trading prior to announcements of changes to the S&P 500 Index.The thesis comprises three essays, each exploring the information content of equity options trading from a different angle. The first essay examines the joint cross section of option implied volatility and corporate bond returns. Theoretical and empirical work in finance suggests that stocks and bonds of the same issuing firm should share common risk factors. Therefore, new information about a firm should affect both its stock and bond prices. However, if one market offers trading incentives over other markets, informed traders and traders with better ability to process information may choose to trade in that market over the others. As a result, markets that provide advantages to informed traders will incorporate information prior to other markets. The empirical analysis in this chapter reveals that options trading is strongly predictive of corporate bond returns. A strategy of buying (selling) the portfolio with the lowest (highest) changes in option implied volatility yields an average monthly excess bond return of 1.03%. This strategy is statistically highly significant and economically very meaningful and indicates that information is incorporated into option prices prior to bond prices. In contrast, I find no evidence that bond prices incorporate information prior to option or stock prices. Since bond investors are generally sophisticated institutional investors who process information efficiently and the predictive ability of options is persistent, I conclude that informed trading rather than superior information processing abilities is responsible for the predictive ability of options.The second essay explores the information content of option implied volatility around the announcements and issue dates of SEOs. The literature on SEOs indicates that announcements and issue dates contain important information about firms and therefore provide profitable opportunities for traders with private information. While prior research has focused on the information content of short sales around SEOs, this study focuses on the information content of options which can act as an alternative for short selling. The empirical analysis provides evidence of informed trading in the options market around SEO announcements. Around SEO issue dates, I find that higher demand for put options is significantly related to larger issue discounts which is consistent with the manipulative trading hypothesis. The results in this study indicate that regulators should consider extending the short-sale restrictions of Rule 105 to restrict trading in related securities.Finally, the third essay investigates the information content of options prior to the S&P 500 Index inclusion and exclusion announcements. These announcements are unique events since they are not announced by the firm and, as stated by S&P, they should convey no new information. In addition, the large abnormal returns observed following these announcements make them distinctive ground for testing the informational role of options. Consistent with the notion that informed traders operate in the options market, the empirical results in this essay indicate that there is a significant relationship between options trading preceding index inclusion announcements and abnormal returns following these announcements. In contrast, I find no evidence for a relationship between options trading and abnormal returns following exclusion announcements.

Essays on Pricing of Derivatives with Interest Rate, Credit, and Equity Risks

Author : Ravi Shanker Mateti
Publisher :
ISBN 13 : 9781109909371
Total Pages : 127 pages
Book Rating : 4.9/5 (93 download)

DOWNLOAD NOW!

Book Synopsis Essays on Pricing of Derivatives with Interest Rate, Credit, and Equity Risks by : Ravi Shanker Mateti

Download or read book Essays on Pricing of Derivatives with Interest Rate, Credit, and Equity Risks written by Ravi Shanker Mateti and published by . This book was released on 2007 with total page 127 pages. Available in PDF, EPUB and Kindle. Book excerpt: Then we show how the Das and Sundaram model can be extended to price convertible bonds which have a peculiar conversion feature; these bonds are convertible not into the stock of the bond issuer, but into the stock of a different company. We also test the empirical performance of this extended model.

Four Essays in the Application of Option Pricing Theory

Author : Anand Mohan Vijh
Publisher :
ISBN 13 :
Total Pages : 272 pages
Book Rating : 4.:/5 (29 download)

DOWNLOAD NOW!

Book Synopsis Four Essays in the Application of Option Pricing Theory by : Anand Mohan Vijh

Download or read book Four Essays in the Application of Option Pricing Theory written by Anand Mohan Vijh and published by . This book was released on 1987 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt:

An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations

Author : Mike Fred Balm
Publisher : Universal-Publishers
ISBN 13 : 1599427192
Total Pages : 126 pages
Book Rating : 4.5/5 (994 download)

DOWNLOAD NOW!

Book Synopsis An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations by : Mike Fred Balm

Download or read book An Empirical Analysis of Stock Option Valuation Methodologies in Closely Held U S Corporations written by Mike Fred Balm and published by Universal-Publishers. This book was released on 2009-05 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: The introduction of fair value accounting for stock options has required private companies to apply stock option valuation methodologies that were designed to be applied to their public counterparts. The two recommended methodologies, the Black-Scholes formula and the Binomial Lattice model, require the valuator to provide an input for estimated volatility; for private companies that do not have a trading history there is limited guidance regarding the determination of volatility, which results in diverging and incorrect estimates. Based on a sample representing 178 companies who filed and completed an IPO in 2006, this study analyzed the accuracy of the recommended valuation methodologies when applied to closely held US corporations. The study outlines the importance of volatility to the value of the options and proceeds to document, by comparing the private (pre-IPO) and public (post-IPO) data, that in 51% of the cases the volatility was either over- or under-stated by more than 10%. In addition, the study shows a bias towards overstatement in the less than 10% variance group. The study further demonstrates that a marginal change in volatility has a significant impact on the company's total stock-based compensation expense and consequently misstates earnings.

Empirical Asset Pricing

Author : Wayne Ferson
Publisher : MIT Press
ISBN 13 : 0262039370
Total Pages : 497 pages
Book Rating : 4.2/5 (62 download)

DOWNLOAD NOW!

Book Synopsis Empirical Asset Pricing by : Wayne Ferson

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.

Essays on Volatilities Implied by Option Prices

Author : Aamir Mohammad Sheikh
Publisher :
ISBN 13 :
Total Pages : 294 pages
Book Rating : 4.:/5 (29 download)

DOWNLOAD NOW!

Book Synopsis Essays on Volatilities Implied by Option Prices by : Aamir Mohammad Sheikh

Download or read book Essays on Volatilities Implied by Option Prices written by Aamir Mohammad Sheikh and published by . This book was released on 1987 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Three Essays in Theoretical and Empirical Derivative Pricing

Author : Hamed Ghanbari
Publisher :
ISBN 13 :
Total Pages : 179 pages
Book Rating : 4.:/5 (113 download)

DOWNLOAD NOW!

Book Synopsis Three Essays in Theoretical and Empirical Derivative Pricing by : Hamed Ghanbari

Download or read book Three Essays in Theoretical and Empirical Derivative Pricing written by Hamed Ghanbari and published by . This book was released on 2017 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first essay investigates the option-implied investor preferences by comparing equilibrium option pricing models under jump-diffusion to option bounds extracted from discrete-time stochastic dominance (SD). We show that the bounds converge to two prices that define an interval comparable to the observed option bid-ask spreads for S&P 500 index options. Further, the bounds' implied distributions exhibit tail risk comparable to that of the return data and thus shed light on the dark matter of the divergence between option-implied and underlying tail risks. Moreover, the bounds can better accommodate reasonable values of the ex-dividend expected excess return than the equilibrium models' prices. We examine the relative risk aversion coefficients compatible with the boundary distributions extracted from index return data. We find that the SD-restricted range of admissible RRA values is consistent with the macro-finance studies of the equity premium puzzle and with several anomalous results that have appeared in earlier option market studies.The second essay examines theoretically and empirically a two-factor stochastic volatility model. We adopt an affine two-factor stochastic volatility model, where aggregate market volatility is decomposed into two independent factors; a persistent factor and a transient factor. We introduce a pricing kernel that links the physical and risk neutral distributions, where investor's equity risk preference is distinguished from her variance risk preference. Using simultaneous data from the S&P 500 index and options markets, we find a consistent set of parameters that characterizes the index dynamics under physical and risk-neutral distributions. We show that the proposed decomposition of variance factors can be characterized by a different persistence and different sensitivity of the variance factors to the volatility shocks. We obtain negative prices for both variance factors, implying that investors are willing to pay for insurance against increases in volatility risk, even if those increases have little persistence. We also obtain negative correlations between shocks to the market returns and each volatility factor, where correlation is less significant in transient factor and therefore has a less significant effect on the index skewness. Our empirical results indicate that unlike stochastic volatility model, join restrictions do not lead to the poor performance of two-factor SV model, measured by Vega-weighted root mean squared errors.In the third essay, we develop a closed-form equity option valuation model where equity returns are related to market returns with two distinct systematic components; one of which captures transient variations in returns and the other one captures persistent variations in returns. Our proposed factor structure and closed-form option pricing equations yield separate expressions for the exposure of equity options to both volatility components and overall market returns. These expressions allow a portfolio manager to hedge her portfolio's exposure to the underlying risk factors. In cross-sectional analysis our model predicts that firms with higher transient beta have a steeper term structure of implied volatility and a steeper implied volatility moneyness slope. Our model also predicts that variances risk premiums have more significant effect on the equity option skew when the transient beta is higher. On the empirical front, for the firms listed on the Dow Jones index, our model provides a good fit to the observed equity option prices.

Three Essays on Option-implied Risk Measures and Equity Pricing

Author : Bo-Young Chang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (713 download)

DOWNLOAD NOW!

Book Synopsis Three Essays on Option-implied Risk Measures and Equity Pricing by : Bo-Young Chang

Download or read book Three Essays on Option-implied Risk Measures and Equity Pricing written by Bo-Young Chang and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Essays on Empirical Asset Pricing

Author : Dongyoup Lee
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (867 download)

DOWNLOAD NOW!

Book Synopsis Essays on Empirical Asset Pricing by : Dongyoup Lee

Download or read book Essays on Empirical Asset Pricing written by Dongyoup Lee and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The results show that there is no empirical evidence that CDS net notional and put option prices are closely connected.