Related papers: La prime de risque dans un cadre international : l…
The paper has 2 main goals: 1. We propose a variant of the CAPM based on coherent risk. 2. In addition to the real-world measure and the risk-neutral measure, we propose the third one: the extreme measure. The introduction of this measure…
In this paper, we test a partially segmented ICAPM for two developed markets, two emerging markets and World market, using an asymmetric extension of the multivariate GARCH process of De Santis and Gerard (1997,1998). We find that this…
We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is…
Range-measured return contains more information than the traditional scalar-valued return. In this paper, we propose to model the [low, high] price range as a random interval and suggest an interval-valued GARCH (Int-GARCH) model for the…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We introduce a new volatility model for option pricing that combines Markov switching with the Realized GARCH framework. This leads to a novel pricing kernel with a state-dependent variance risk premium and a pricing formula for European…
In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling…
This paper introduces a new type of risk measures, namely regime switching entropic risk measures, and study their applicability through simulations. The state of the economy is incorporated into the entropic risk formulation by using a…
The risk-neutral option pricing method under GARCH intensity model is examined. The GARCH intensity model incorporates the characteristics of financial return series such as volatility clustering, leverage effect and conditional asymmetry.…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
In this work, we consider the issue of pricing exchange options and spread options with stochastic interest rates. We provide the closed form solution for the exchange option price when interest rate is stochastic. Our result holds when…
In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…
In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…
Two formulations are proposed to filter out correlations in the residuals of the multivariate GARCH model. The first approach is to estimate the correlation matrix as a parameter and transform any joint distribution to have an arbitrary…
The purpose of this paper is to utilize statistical methodologies to infer from market prices of assets and their derivatives the magnitude of the set of a measure M that defines acceptance sets of risky future cash flows. Specifically, we…
New versions of the set-valued average value at risk for multivariate risks are introduced by generalizing the well-known certainty equivalent representation to the set-valued case. The first "regulator" version is independent from any…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the…