Perception des risques sur les marchés, construction d'un indice élaboré à partir des smiles d'options et test de stratégies
AbstractRisk perception on financial markets, construction of anindicator based on options smiles and test of strategies This work aims to construct an indicator reflecting the risk perception on different markets and to test if this information is valuable in elaborating allocation strategies. We use daily option smiles data on 5markets (S?P 500, DAX, Nikkei, euro/$ and $/yen) during the period October 1999 ? June 2003 to calculate the distribution of market expectations (the risk neutral density function) each day. By comparing this distribution to the historical density function (calculated using a kernel estimator), we deduce investor risk aversion, which allows us to build an indicator of risk perception for each of the 5markets as well as a global indicator. We test the profitability of strategies based on our indicators. We underweight risky assets when risk aversion is high and overweight when it is low. Comparing the performances of our test portfolios with that of a benchmark composed of 50%/50 % of risky/non risky assets, we show that signals given by our risk aversion indicators help to improve portfolio performances, except for the forex positions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Dalloz in its journal Revue d'économie politique.
Volume (Year): Volume 114 (2004)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.cairn.info/revue-d-economie-politique.htm
risk neutral density; option pricing; forex options; stock indices options; risk aversion; strategies;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
- Corrado, Charles J & Su, Tie, 1996. "Skewness and Kurtosis in S&P 500 Index Returns Implied by Option Prices," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 19(2), pages 175-92, Summer.
- Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2000.
"Aggregate Price Shocks and Financial Instability: An Historical Analysis,"
NBER Working Papers
7652, National Bureau of Economic Research, Inc.
- Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2002. "Aggregate Price Shocks and Financial Instability: A Historical Analysis," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 521-538, October.
- Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2000. "Aggregate Price Shocks and Financial Instability: An Historical Analysis," NBER Historical Working Papers 0125, National Bureau of Economic Research, Inc.
- Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2001. "Aggregate price shocks and financial instability: a historical analysis," Working Papers 2000-005, Federal Reserve Bank of St. Louis.
- Yacine Ait-Sahalia & Andrew W. Lo, 2000.
"Nonparametric Risk Management and Implied Risk Aversion,"
NBER Working Papers
6130, National Bureau of Economic Research, Inc.
- Ait-Sahalia, Yacine & Lo, Andrew W., 2000. "Nonparametric risk management and implied risk aversion," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 9-51.
- Allan M. Malz, 1997. "Option-implied probability distributions and currency excess returns," Staff Reports 32, Federal Reserve Bank of New York.
- Mc Manus, Des, 1999. "The Information Content of Interest Rate Futures Options," Working Papers 99-15, Bank of Canada.
- Jackwerth, Jens Carsten & Rubinstein, Mark, 1996. " Recovering Probability Distributions from Option Prices," Journal of Finance, American Finance Association, vol. 51(5), pages 1611-32, December.
- Jackwerth, Jens Carsten, 2000.
"Recovering Risk Aversion from Option Prices and Realized Returns,"
Review of Financial Studies,
Society for Financial Studies, vol. 13(2), pages 433-51.
- Jens Carsten Jackwerth, 1998. "Recovering Risk Aversion from Option Prices and Realized Returns," Finance 9803002, EconWPA.
- Jens Carsten Jackwerth., 1996. "Recovering Risk Aversion from Option Prices and Realized Returns," Research Program in Finance Working Papers RPF-265, University of California at Berkeley.
- Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
- Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Working Papers 03-14, Bank of Canada.
- Rosenberg, Joshua V. & Engle, Robert F., 2002.
"Empirical pricing kernels,"
Journal of Financial Economics,
Elsevier, vol. 64(3), pages 341-372, June.
- Joshua Rosenberg & Robert F. Engle, 2000. "Empirical Pricing Kernels," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-014, New York University, Leonard N. Stern School of Business-.
- Buchen, Peter W. & Kelly, Michael, 1996. "The Maximum Entropy Distribution of an Asset Inferred from Option Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(01), pages 143-159, March.
- Jondeau, Eric & Rockinger, Michael, 2000.
"Reading the smile: the message conveyed by methods which infer risk neutral densities,"
Journal of International Money and Finance,
Elsevier, vol. 19(6), pages 885-915, December.
- Jondeau, Eric & Rockinger, Michael, 1998. "Reading the Smile: The Message Conveyed by Methods which Infer Risk Neutral Densities," CEPR Discussion Papers 2009, C.E.P.R. Discussion Papers.
- Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.