Derivative Securities Pricing and Modelling

446 Pages·2012·11.014 MB·English

by  Niklas Wagner (editor)

DERIVATIVE SECURITIES PRICING
AND MODELLING
CONTEMPORARY STUDIES IN
ECONOMIC AND FINANCIAL
ANALYSIS
Series Editors: Robert Thornton and
J. Richard Aronson
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CONTEMPORARY STUDIES IN ECONOMIC AND
FINANCIAL ANALYSIS VOLUME 94
DERIVATIVE
SECURITIES PRICING
AND MODELLING
EDITED BY
JONATHAN A. BATTEN
Hong Kong University of Science & Technology, Hong Kong
NIKLAS WAGNER
University of Passau, Germany
United Kingdom – North America – Japan
India – Malaysia – China
EmeraldGroupPublishingLimited
HowardHouse,WagonLane,BingleyBD161WA,UK
Firstedition2012
Copyrightr2012EmeraldGroupPublishingLimited
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ISBN:978-1-78052-616-4
ISSN:1569-3759(Series)
CONTENTS
LIST OF CONTRIBUTORS ix
PART I: ADVANCES IN DERIVATIVES AND ECONOMIC
STABILITY
DERIVATIVES SECURITIES PRICING AND
MODELLING
Jonathan A. Batten and Niklas Wagner 3
ON THE ROLE OF OPTION APPLICATIONS IN
ECONOMIC INSTABILITY
Kavous Ardalan 15
DERIVATIVES,COMMODITIES,ANDSOCIALCOSTS:
EXPLORING CORRELATION IN ECONOMIC
UNCERTAINTY
Aleksandr V. Gevorkyan and Arkady Gevorkyan 47
CONTINGENT CAPITAL SECURITIES: PROBLEMS
AND SOLUTIONS
Michalis Ioannides and Frank S. Skinner 71
HIGH DIMENSIONALITY IN FINANCE: A
GRAPH-THEORY ANALYSIS
Delphine Lautier and Franck Raynaud 93
v
vi CONTENTS
PART II: DERIVATIVES PRICES AND RISK-NEUTRAL
DISTRIBUTIONS
RECOVERING STOCHASTIC PROCESSES FROM
OPTION PRICES
Jens Carsten Jackwerth and Mark Rubinstein 123
THE PRICING KERNEL PUZZLE: RECONCILING
INDEX OPTION DATA AND ECONOMIC THEORY
David P. Brown and Jens Carsten Jackwerth 155
RISK-NEUTRAL DENSITIES AND CATASTROPHE
EVENTS
Michael Herold and Matthias Muck 185
PART III: DERIVATIVES MODELS AND MODEL
PERFORMANCE
NON-GAUSSIAN PRICE DYNAMICS AND
IMPLICATIONS FOR OPTION PRICING
Miguel Angel Fuentes, Austin Gerig and Javier Vicente 211
ON THE EMPIRICAL BEHAVIOR OF STOCHASTIC
VOLATILITY MODELS: DO SKEWNESS AND
KURTOSIS MATTER?
Marco M. Garcı´a-Alonso, Manuel Moreno and 227
Javier F. Navas
RE-EVALUATING HEDGING PERFORMANCE FOR
ASYMMETRY: THE CASE OF CRUDE OIL
John Cotter and Jim Hanly 259
ON THE BINOMIAL-TREE APPROACH TO
CONVERTIBLE BONDS PRICING AND RISK
ASSESSMENT
Krasimir Milanov and Ognyan Kounchev 281
Contents vii
PART IV: DERIVATIVES MODELS, RISK MANAGEMENT,
CREDIT AND CORPORATE CONTROL
A NEW PARADIGM FOR INFLATION DERIVATIVES
MODELING
Lixin Wu 305
AN OPTION-PRICING FRAMEWORK FOR THE
VALUATION OF FUND MANAGEMENT
COMPENSATION
AxelBuchner,AbdulkadirMohamedandNiklasWagner 331
AN EQUITY-BASED CREDIT RISK MODEL
Gaia Barone 351
BUSINESS CYCLES AND THE IMPACT OF
MACROECONOMICSURPRISESONINTERESTRATE
SWAP SPREADS: AUSTRALIAN EVIDENCE
Victor Fang, A. S. M. Sohel Azad, Jonathan A. Batten 379
and Chien-Ting Lin
THE EVOLUTION OF THE USE OF DERIVATIVES IN
SLOVENIAN NON-FINANCIAL COMPANIES
Ales Berk Skok, Igor Loncarski and Matevz Skocir 399
INDEX 429

LIST OF CONTRIBUTORS
Kavous Ardalan School of Management, Marist College,
Poughkeepsie, NY, USA
A.S.M. Sohel Azad School of Accounting, Economics and
Finance, Deakin University, Victoria,
Australia
Gaia Barone Department of Economics, ‘‘Tor
Vergata’’ University, Rome, Italy
Jonathan A. Batten Department of Finance, Hong Kong
University of Science and Technology,
Hong Kong
David P. Brown School of Business, University of
Wisconsin–Madison, Madison, WI,
USA
Axel Buchner Department of Finance, University of
Passau, Passau, Germany
John Cotter School of Business, University College
Dublin, Blackrock, Ireland
Victor Fang School of Accounting, Economics and
Finance, Deakin University, Victoria,
Australia
Miguel Angel Fuentes CONICET, Centro Atomico Bariloche,
Bariloche, Black River, Argentina;
School of Government, Universidad del
Desarrollo, Santiago, Chile
Marco M. Garcı´a-Alonso BBVA Madrid, Madrid, Spain
Austin Gerig CABDyN Complexity Centre, Say¨d
BusinessSchool,UniversityofOxford,UK
ix