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on Financial Markets |
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Issue of 2008‒10‒13
five papers chosen by |
| By: | Yilmaz Akyuz (Third World Network) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:tek:wpaper:2008/15&r=fmk |
| By: | Ashkan Nikeghbali (Institut fÄur Mathematik, UniversitÄat ZÄurich); Eckhard Platen (School of Finance and Economics, University of Technology, Sydney) |
| Abstract: | This paper demonstrates the usefulness and importance of the concept of honest times to financial modeling. It studies a financial market with asset prices that follow jump-diffusions with negative jumps. The central building block of the market model is its growth optimal portfolio (GOP), which maximizes the growth rate of strictly positive portfolios. Primary security account prices, when expressed in units of the GOP, turn out to be nonnegative local martingales. In the proposed framework an equivalent risk neutral probability measure need not exist. Derivative prices are obtained as conditional expectations of corresponding future payoffs, with the GOP as numeraire and the real world probability as pricing measure. The time when the global maximum of a portfolio with no positive jumps, when expressed in units of the GOP, is reached, is shown to be a generic representation of an honest time. We provide a general formula for the law of such honest times and compute the conditional distributions of the global maximum of a portfolio in this framework. Moreover, we provide a stochastic integral representation for uniformly integrable martingales whose terminal values are functions of the global maximum of a portfolio. These formulae are model independent and universal. We also specialize our results to some examples where we hedge a payoff that arrives at an honest time. |
| Keywords: | jump diffusion market; honest times; growth optimal portfolio; benchmark approach; real world pricing; nonnegative local martingales |
| JEL: | G10 G13 |
| Date: | 2008–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:229&r=fmk |
| By: | Canegrati, Emanuele |
| Abstract: | The aim of the following work is to exploit principal econometric tecniques to test the Capital Asset Pricing Model theory in Italian equity markets. CAPM is a financial model which describes expected returns of any assets (or asset portfolio) as a function of the expected return on the market portfolio. In this paper I will first explain the meaning of the market risk and I will measure it via the estimation of beta coeffcients, which are seen as a measure of assets sensitivity to market portfolio fluctuations. The theoretical framework is based on the Sharpe (1964) and Lintner (1965) version of the CAPM and on the Pettengill's hypothesis (1995) over the relationship between betas and returns. Secondly, I will test the presence of specific effects which usually occur in financial markets; in particular, I will check the presence of the well-known January effect and detect the existence of structural breaks over the considered period of time. |
| Keywords: | CAPM; Structural breaks; January effect |
| JEL: | G14 G11 |
| Date: | 2008–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10407&r=fmk |
| By: | Roberto Casarin; Loriana Pelizzon; Andrea Piva |
| Abstract: | Have Italian mutual funds been able to generate "extra-return"? Were some of them able to persistently beat the competitors? In this paper we address thee question and provide a detailed and systematic performance and return persistence analysis of the Italian equity mutual funds. We show that, in general, fund managers have not benn able to score extra-performances and only few managers had stock picking ability or market timing ability. This evidence is consistent with the market efficiency hypothesis. Moreover, concerning performance persistence, first, we cannot trace out the hot-hand phenomenon on raw returns. The no persistence effect is fairly robust to: the performance measure, the temporal lag and the different methodology employed for testing persistence. Second, there has not been long-run persistence on risk-adjusted returns (we find a weak evidence of the reversal effect). Finally, the past performance displays weak evidence of the hot-hand effect on risk-adjusted returns on four-month using cross-section tests. However, as soon as we analyse yearly intervals any evidence of persistence disappears. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ubs:wpaper:0817&r=fmk |
| By: | KAPITSINAS, SPYRIDON |
| Abstract: | This paper presents evidence on the use of derivative contracts in the risk management process of Greek non-financial firms. The survey was conducted by sending a questionnaire to 110 non-financial firms and its results are compared with the findings of previous surveys: 33.9% of non-financial firms in Greece use derivatives, mainly to hedge their exposure to interest rate risk. The major source of concern for derivatives users is the accounting treatment of the contracts and the disclosure requirement. Non-financial firms in Greece use sophisticated methods of risk assessment and report having a documented corporate policy with respect to the use of derivatives, while at the same time consider the domestic economic environment not to be favorable of derivatives usage. Firms that chose not to use derivatives responded that they do so mainly because of insufficient exposure to risks. |
| Keywords: | risk management; financial risk; derivatives; corporate finance; Greece. |
| JEL: | G32 |
| Date: | 2008–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10945&r=fmk |