asset-pricing


asset pricing - Are returns predictable, Campbell and Shiller (1988)

Let me start with a simple example. Suppose you have a dividend strip that pays an unknown dividend $DT$. The gross return (something like 1.05 and NOT 5%!) on this security is, by definition, $$R{t\... Read More


asset pricing - At the money put and call having the same price

One thing to notice is that indeed $E^Q[ST]=S0$, by construction, even though the stock price can only drop down to 0, but it can go up to $2\,S0, 3\,S0, 100\,S_0$, ... Thus, implicitly, there are c... Read More


pricing - Time of Nasdaq daily close price

Neither. Nasdaq publishes a close price at 4:01:30 p.m. ET known as the Nasdaq Official Close Price ("NOCP"). Nasdaq also amends this price up to 5:15 p.m. ET if any trades that were used to calculat... Read More


Bayesian estimation of asset pricing models

Fitting Fama-French or Carhart is as simple as learning how to perform Bayesian regression. Pretty much every introductory book Bayesian estimation will cover this. There are analytic formulae under... Read More


black scholes - Question regarding No Arbitrage price of a call option

Yes you can use the Black-Scholes Model with $K=B(T)$ because $B(T)$ is deterministic (a constant like $K$, since $T$ is constant). However your current solution is incorrect as the Black-Scholes cal... Read More


option pricing - How to hedge a derivative that pays the reciprocal of the stock price?

Note that, for a smooth function and constant a $$f(St) = f(a) + f'(a) (St-a) + \inta^{\infty}(St-x)^+f^{''}(x)dx + \int{0}^a(x - St)^+f^{''}(x)dx.$$ Then, the payoff $1/St$ can be approximately hedg... Read More


reference request - ETF pricing papers

There are a few papers out there. A good starting point os the (always relevant) Grossman and Stiglitz (1980) "On the Impossibility of Informationally Efficient Markets" which shows that markets cann... Read More


asset pricing - What should happen to the equity risk premium as rates change?

There does not seem to be a clear relationship between interest rates and equity risk premiums. Damodaran (2019) has a great paper that goes into details of equity risk premiums. In this work, he wri... Read More


finance - Fama Mac-Beth (1973) vs Fixed effect

A more apples to apples comparison would be between (i) Fama-Macbeth procedure and (2) clustering standard-errors by date. Adding fixed-effects is somewhat different. Problem: cross-sectional correla... Read More


risk management - How to model the maturity term of non maturing deposit accounts

I am afraid there is no short answer to that question. However there is some literature you can check. In this paper the author gives an overview over different methods and lists a lot of references.... Read More