Risk Neutral Distributions Implied in Option Prices and Their Relevance for Monetary Policy PDF Download
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Author: Luca Cazzulani
Publisher:
ISBN:
Category :
Languages : en
Pages : 153
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Author: Luca Cazzulani
Publisher:
ISBN:
Category :
Languages : en
Pages : 153
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Author: Jens Carsten Jackwerth
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Allan M. Malz
Publisher:
ISBN:
Category : Distribution (Probability theory)
Languages : en
Pages : 34
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Author: Jens Carsten Jackwerth
Publisher:
ISBN:
Category :
Languages : en
Pages : 17
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Book Description
In this partial and selective literature review of option implied risk-neutral distributions and of implied binomial trees, we start by observing that in efficient markets, there is information contained in option prices, which might help us to design option pricing models. To this end, we review the numerous methods of recovering risk-neutral probability distributions from option prices at one particular time-to-expiration and their applications. Next, we extend our attention beyond one time-to-expiration to the construction of implied binomial trees, which model the stochastic process of the underlying asset. Finally, we describe extensions of implied binomial trees, which incorporate stochastic volatility, as well as other non-parametric methods.
Author: George M. Constantinides
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Zhaohui Chen
Publisher: World Scientific
ISBN: 9814499161
Category : Business & Economics
Languages : en
Pages : 218
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Book Description
This volume is a collection of classical and recent empirical studies of currency options and their implications for issues of exchange rate economics, such as exchange rate risk premium, volatility, market expectations, and credibility of exchange rate regimes. It contains applications on how to extract useful information from option market data for financial forecasting policy purposes. The subjects are discussed in a self-contained, user-friendly format, with introductory chapters on currency option theory and currency option markets.The book can be used as supplementary reading for graduate finance and international economics courses, as training material for central bank and regulatory authorities, or as a reference book for financial analysts.
Author: José Campa
Publisher:
ISBN:
Category : Foreign exchange options
Languages : en
Pages : 64
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Book Description
This paper uses a rich new data set of option prices on the dollar-mark, dollar-yen, and key EMS cross-rates to extract the entire risk-neutral probability density function (pdf) over horizons of one and three months. We compare three alternative smoothing methods--cubic splines, an implied binomial tree (trimmed and untrimmed), and a mixture of lognormals--for transforming option data into the pdf. Despite their methodological ifferences, the three approaches lead to a similar pdf distinct from the lognormal benchmark, and usually characterized by skewness and leptokurtosis. We then document a striking positive correlation between skewness in these pdfs and the spot rate. The stronger a currency the more expectations are skewed towards a further appreciation of that currency. We interpret this finding as a rejection that these exchange rates evolve as a martingale, or that they follow a credible target zone, explicit or implicit. Instead, this this positive correlation is consistent with target zones with endogenous realignment risk. We discuss two interpretations of our results on skewness: when a currency is stronger, the actual probability of further large appreciation is higher, or because of risk, such states are valued more highly.
Author: Bhupinder Bahra
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Stephen Satchell
Publisher: Elsevier
ISBN: 0080494978
Category : Business & Economics
Languages : en
Pages : 417
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Book Description
'Forecasting Volatility in the Financial Markets' assumes that the reader has a firm grounding in the key principles and methods of understanding volatility measurement and builds on that knowledge to detail cutting edge modelling and forecasting techniques. It then uses a technical survey to explain the different ways to measure risk and define the different models of volatility and return.The editors have brought together a set of contributors that give the reader a firm grounding in relevant theory and research and an insight into the cutting edge techniques applied in this field of the financial markets.This book is of particular relevance to anyone who wants to understand dynamic areas of the financial markets.* Traders will profit by learning to arbitrage opportunities and modify their strategies to account for volatility.* Investment managers will be able to enhance their asset allocation strategies with an improved understanding of likely risks and returns.* Risk managers will understand how to improve their measurement systems and forecasts, enhancing their risk management models and controls.* Derivative specialists will gain an in-depth understanding of volatility that they can use to improve their pricing models.* Students and academics will find the collection of papers an invaluable overview of this field. This book is of particular relevance to those wanting to understand the dynamic areas of volatility modeling and forecasting of the financial marketsProvides the latest research and techniques for Traders, Investment Managers, Risk Managers and Derivative Specialists wishing to manage their downside risk exposure Current research on the key forecasting methods to use in risk management, including two new chapters
Author: Bhupinder Bahra
Publisher:
ISBN:
Category : Prices
Languages : en
Pages : 56
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