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Author: Jörg Stephan Cyriax
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This thesis extends the findings on implied moments in equity markets to commodities and presents supporting evidence for demand-based option pricing and informed trading. Different implied moments measured by various metrics which are calculated based on a set of maturities and moneyness levels as well as their innovations are subject of the presented investigations. The sample comprises the 24 GSCI commodities in the period from January 2006 until June 2017. Several portfolio sorts and additional predictive fixed effects panel regressions confirm an economically and statistically significant negative predictive ability of innovations of relative implied skewness which increases with maturity and distance from at-the-money. This predictive ability is almost purely driven by the anticipation of lower returns, i.e. downside jump risk. A low-minus-high trading strategy based on innovations of implied skewness is constructed returning 11.90\% p.a. (after transaction costs of 0.033\% per trade and with 50\% collateralization) which cannot be explained by common commodity factors. The underlying predictive ability can be reasoned with better information of some market participants (informed trading) whose option demand causes the implied volatility smile to adjust accordingly. Eventually, concurrent and predictive effects of implied volatility and implied skewness for the commodity basis are found which may lay the foundation for extending the implied moments-related research to physical variables.
Author: Jörg Stephan Cyriax
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This thesis extends the findings on implied moments in equity markets to commodities and presents supporting evidence for demand-based option pricing and informed trading. Different implied moments measured by various metrics which are calculated based on a set of maturities and moneyness levels as well as their innovations are subject of the presented investigations. The sample comprises the 24 GSCI commodities in the period from January 2006 until June 2017. Several portfolio sorts and additional predictive fixed effects panel regressions confirm an economically and statistically significant negative predictive ability of innovations of relative implied skewness which increases with maturity and distance from at-the-money. This predictive ability is almost purely driven by the anticipation of lower returns, i.e. downside jump risk. A low-minus-high trading strategy based on innovations of implied skewness is constructed returning 11.90\% p.a. (after transaction costs of 0.033\% per trade and with 50\% collateralization) which cannot be explained by common commodity factors. The underlying predictive ability can be reasoned with better information of some market participants (informed trading) whose option demand causes the implied volatility smile to adjust accordingly. Eventually, concurrent and predictive effects of implied volatility and implied skewness for the commodity basis are found which may lay the foundation for extending the implied moments-related research to physical variables.
Author: Linda Canina
Publisher:
ISBN:
Category : Stock options
Languages : en
Pages : 40
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Book Description
Author: Pierre Giot
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
Author: Henri Theil
Publisher:
ISBN:
Category : Economic forecasting
Languages : en
Pages : 508
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Book Description
The subjects covered include econometric macromodels, preliminary estimates of recent changes input-outputs, forecast applications of information concepts and various survey techniques dealing ...
Author: Thi Le
Publisher: Springer Nature
ISBN: 3030712427
Category : Business & Economics
Languages : en
Pages : 350
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Book Description
This book focuses on the impact of high-frequency data in forecasting market volatility and options price. New technologies have created opportunities to obtain better, faster, and more efficient datasets to explore financial market phenomena at the most acceptable data levels. It provides reliable intraday data supporting financial investment decisions across different assets classes and instruments consisting of commodities, derivatives, equities, fixed income and foreign exchange. This book emphasises four key areas, (1) estimating intraday implied volatility using ultra-high frequency (5-minutes frequency) currency options to capture traders' trading behaviour, (2) computing realised volatility based on 5-minute frequency currency price to obtain speculators' speculation attitude, (3) examining the ability of implied volatility to subsume market information through forecasting realised volatility and (4) evaluating the predictive power of implied volatility for pricing currency options. This is a must-read for academics and professionals who want to improve their skills and outcomes in trading options.
Author: Craig Pirrong
Publisher: Cambridge University Press
ISBN: 1139501976
Category : Business & Economics
Languages : en
Pages : 238
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Book Description
Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.
Author: Bernard Dumas
Publisher:
ISBN:
Category : Options (Finance)
Languages : en
Pages : 34
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Book Description
Abstract: Black and Scholes (1973) implied volatilities tend to be systematically related to the option's exercise price and time to expiration. Derman and Kani (1994), Dupire (1994), and Rubinstein (1994) attribute this behavior to the fact that the Black-Scholes constant volatility assumption is violated in practice. These authors hypothesize that the volatility of the underlying asset's return is a deterministic function of the asset price and time and develop the deterministic volatility function (DVF) option valuation model, which has the potential of fitting the observed cross-section of option prices exactly. Using a sample of S & P 500 index options during the period June 1988 through December 1993, we evaluate the economic significance of the implied deterministic volatility function by examining the predictive and hedging performance of the DV option valuation model. We find that its performance is worse than that of an ad hoc Black-Scholes model with variable implied volatilities.
Author: Emanuel Derman
Publisher: John Wiley & Sons
ISBN: 1118959167
Category : Business & Economics
Languages : en
Pages : 528
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Book Description
The Volatility Smile The Black-Scholes-Merton option model was the greatest innovation of 20th century finance, and remains the most widely applied theory in all of finance. Despite this success, the model is fundamentally at odds with the observed behavior of option markets: a graph of implied volatilities against strike will typically display a curve or skew, which practitioners refer to as the smile, and which the model cannot explain. Option valuation is not a solved problem, and the past forty years have witnessed an abundance of new models that try to reconcile theory with markets. The Volatility Smile presents a unified treatment of the Black-Scholes-Merton model and the more advanced models that have replaced it. It is also a book about the principles of financial valuation and how to apply them. Celebrated author and quant Emanuel Derman and Michael B. Miller explain not just the mathematics but the ideas behind the models. By examining the foundations, the implementation, and the pros and cons of various models, and by carefully exploring their derivations and their assumptions, readers will learn not only how to handle the volatility smile but how to evaluate and build their own financial models. Topics covered include: The principles of valuation Static and dynamic replication The Black-Scholes-Merton model Hedging strategies Transaction costs The behavior of the volatility smile Implied distributions Local volatility models Stochastic volatility models Jump-diffusion models The first half of the book, Chapters 1 through 13, can serve as a standalone textbook for a course on option valuation and the Black-Scholes-Merton model, presenting the principles of financial modeling, several derivations of the model, and a detailed discussion of how it is used in practice. The second half focuses on the behavior of the volatility smile, and, in conjunction with the first half, can be used for as the basis for a more advanced course.
Author: Colin Bennett
Publisher:
ISBN: 9781461108757
Category :
Languages : en
Pages : 316
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Book Description
This publication aims to fill the void between books providing an introduction to derivatives, and advanced books whose target audience are members of quantitative modelling community. In order to appeal to the widest audience, this publication tries to assume the least amount of prior knowledge. The content quickly moves onto more advanced subjects in order to concentrate on more practical and advanced topics. "A master piece to learn in a nutshell all the essentials about volatility with a practical and lively approach. A must read!" Carole Bernard, Equity Derivatives Specialist at Bloomberg "This book could be seen as the 'volatility bible'!" Markus-Alexander Flesch, Head of Sales & Marketing at Eurex "I highly recommend this book both for those new to the equity derivatives business, and for more advanced readers. The balance between theory and practice is struck At-The-Money" Paul Stephens, Head of Institutional Marketing at CBOE "One of the best resources out there for the volatility community" Paul Britton, CEO and Founder of Capstone Investment Advisors "Colin has managed to convey often complex derivative and volatility concepts with an admirable simplicity, a welcome change from the all-too-dense tomes one usually finds on the subject" Edmund Shing PhD, former Proprietary Trader at BNP Paribas "In a crowded space, Colin has supplied a useful and concise guide" Gary Delany, Director Europe at the Options Industry Council
Author: Jens Carsten Jackwerth
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
