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Chen_uta_2502D_12115
Chen_uta_2502D_12115

Chapter 1 Introduction to Portfolio Theory
Chapter 1 Introduction to Portfolio Theory

Asset Liquidity and Stock Liquidity
Asset Liquidity and Stock Liquidity

... Using this approach we come up with 4 alternative measures of asset liquidity that vary based on the liquidity scores assigned to the different assets. In our 1st set of tests we estimate the time-series and cross-sectional relation between asset liquidity and stock liquidity. These tests help us un ...
Gain/loss Asymmetry and the Leverage Effect
Gain/loss Asymmetry and the Leverage Effect

... another point of view and asked an inverse question: ‘For a given velocity difference between two fluid molecules, what is the typical, averaged, distance where such a velocity difference is obtained for the first time?’ [28]. Performing this analysis leads to so-called inverse structure functions, ...
Quantitative Easing and Volatility Spillovers across
Quantitative Easing and Volatility Spillovers across

ITO33 Alain Ouzou and Pedro Ferreira of ITO33 discuss the
ITO33 Alain Ouzou and Pedro Ferreira of ITO33 discuss the

High Idiosyncratic Volatility and Low Returns
High Idiosyncratic Volatility and Low Returns

JOHN C.HULL
JOHN C.HULL

... It is sometimes hard for me to believe that the first edition of this book was only 330 pages and 13 chapters long! There have been many developments in derivatives markets over the last 15 years and the book has grown to keep up with them. The fifth edition has seven new chapters that cover new der ...
By Force of Habit: A Consumption-Based
By Force of Habit: A Consumption-Based

Paper
Paper

Tests of Investor Learning Models Using Earnings
Tests of Investor Learning Models Using Earnings

How Does A Firm`s Default Risk Affect Its Expected Equity Return?
How Does A Firm`s Default Risk Affect Its Expected Equity Return?

... default risk due to changes in expected profitability and the debt level are always positively related to changes in the expected equity return. Second, if asset volatility varies, then changes in default risk due to varying asset volatility are also always positively related to changes in the expec ...
Essays on Volatility Derivatives and Portfolio Optimization
Essays on Volatility Derivatives and Portfolio Optimization

Lévy Processes in Finance: Theory, Numerics, and Empirical Facts
Lévy Processes in Finance: Theory, Numerics, and Empirical Facts

... law, which states that humans perceive the intensity of stimuli on a log scale rather than a linear scale. In a more systematic manner, the same process exp(Bt ), which is called exponential—or geometric— Brownian motion, was introduced as a stock price model by Samuelson (1965). One of the first to ...
Volatility Markets Consistent modeling, hedging and practical
Volatility Markets Consistent modeling, hedging and practical

... Conceptually quite different from this fitting approach are stochastic volatility models. In these models, a parsimonious description of the dynamics of both the stock price and its instantaneous variance is the starting point. Such a model is based on “structural” assumptions on the underlying stoc ...
Aggregate Jump and Volatility Risk in the Cross
Aggregate Jump and Volatility Risk in the Cross

Valuation and Hedging of LPI Liabilities - Heriot
Valuation and Hedging of LPI Liabilities - Heriot

Heat Waves, Meteor Showers, and Trading Volume: An Analysis of
Heat Waves, Meteor Showers, and Trading Volume: An Analysis of

Dedicated Short Bias Hedge Funds
Dedicated Short Bias Hedge Funds

... the markets fall in value, the perfect vehicle to capitalize on the market conditions of 2007 and 2008. Some critics may argue that DSB hedge funds strong performance during the financial crisis was just a product of the times. A period when all forces conspired to provide DSB funds with ideal condi ...
Index Derivatives Reference Manual
Index Derivatives Reference Manual

... 3. What is a Futures Contract and How Does it Work? A futures contract is an exchange-traded contract that is used for both hedging (risk management) and directional trading (income generation). The buyer of a futures contract establishes a long position; the seller establishes a short position. Su ...
exam133
exam133

... 11. (03 Points) Suppose a company enters into an interest rate swap as a cash flow hedge of variable interest rate debt. Present value of each swap settlement is computed according to which of the following answers assuming an upward sloping yield curve? a. Use a constant discount rate computed as ...
Interest Rate Derivatives – Fixed Income Trading Strategies
Interest Rate Derivatives – Fixed Income Trading Strategies

... of the fixed income derivatives traded on Eurex. You will be asked a variety of questions based on the brochure “Interest Rate Derivatives – Fixed Income Trading Strategies”. The answers should familiarize you with this particular market segment and enhance your understanding of the contracts traded ...
Downside Risk Neutral Probabilities
Downside Risk Neutral Probabilities

... relative marginal utility of wealth in this state. Another (equivalent) approach is to adjust the probabilities of states of the world in such a way that the asset price is simply equal to the discounted expected payoff of the asset under the risk neutral measure. Thus, “risk neutral probabilities” ...
Optimal Hedging when the Underlying Asset Follows a
Optimal Hedging when the Underlying Asset Follows a

strategic asset allocation
strategic asset allocation

1 2 3 4 5 ... 35 >

Black–Scholes model

The Black–Scholes /ˌblæk ˈʃoʊlz/ or Black–Scholes–Merton model is a mathematical model of a financial market containing derivative investment instruments. From the model, one can deduce the Black–Scholes formula, which gives a theoretical estimate of the price of European-style options. The formula led to a boom in options trading and legitimised scientifically the activities of the Chicago Board Options Exchange and other options markets around the world. lt is widely used, although often with adjustments and corrections, by options market participants. Many empirical tests have shown that the Black–Scholes price is ""fairly close"" to the observed prices, although there are well-known discrepancies such as the ""option smile"".The Black–Scholes model was first published by Fischer Black and Myron Scholes in their 1973 paper, ""The Pricing of Options and Corporate Liabilities"", published in the Journal of Political Economy. They derived a partial differential equation, now called the Black–Scholes equation, which estimates the price of the option over time. The key idea behind the model is to hedge the option by buying and selling the underlying asset in just the right way and, as a consequence, to eliminate risk. This type of hedging is called delta hedging and is the basis of more complicated hedging strategies such as those engaged in by investment banks and hedge funds.Robert C. Merton was the first to publish a paper expanding the mathematical understanding of the options pricing model, and coined the term ""Black–Scholes options pricing model"". Merton and Scholes received the 1997 Nobel Memorial Prize in Economic Sciences for their work. Though ineligible for the prize because of his death in 1995, Black was mentioned as a contributor by the Swedish Academy.The model's assumptions have been relaxed and generalized in many directions, leading to a plethora of models that are currently used in derivative pricing and risk management. It is the insights of the model, as exemplified in the Black-Scholes formula, that are frequently used by market participants, as distinguished from the actual prices. These insights include no-arbitrage bounds and risk-neutral pricing. The Black-Scholes equation, a partial differential equation that governs the price of the option, is also important as it enables pricing when an explicit formula is not possible.The Black–Scholes formula has only one parameter that cannot be observed in the market: the average future volatility of the underlying asset. Since the formula is increasing in this parameter, it can be inverted to produce a ""volatility surface"" that is then used to calibrate other models, e.g. for OTC derivatives.
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