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Option pricing under a stressed-beta model

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  • Jean-Pierre Fouque
  • Adam Tashman

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Suggested Citation

  • Jean-Pierre Fouque & Adam Tashman, 2012. "Option pricing under a stressed-beta model," Annals of Finance, Springer, vol. 8(2), pages 183-203, May.
    • Handle: RePEc:kap:annfin:v:8:y:2012:i:2:p:183-203
    DOI: 10.1007/s10436-009-0141-y
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    References listed on IDEAS

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    1. Jagannathan, Ravi & Wang, Zhenyu, 1996. "The Conditional CAPM and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 51(1), pages 3-53, March.
    2. Eric Ghysels, 1998. "On Stable Factor Structures in the Pricing of Risk: Do Time-Varying Betas Help or Hurt?," Journal of Finance, American Finance Association, vol. 53(2), pages 549-573, April.
    3. Ferson, Wayne E & Harvey, Campbell R, 1991. "The Variation of Economic Risk Premiums," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 385-415, April.
    4. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    5. Akdeniz Levent & Altay-Salih Aslihan & Caner Mehmet, 2003. "Time-Varying Betas Help in Asset Pricing: The Threshold CAPM," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(4), pages 1-18, March.
    6. Ferson, Wayne E & Korajczyk, Robert A, 1995. "Do Arbitrage Pricing Models Explain the Predictability of Stock Returns?," The Journal of Business, University of Chicago Press, vol. 68(3), pages 309-349, July.
    7. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    8. Ferson, Wayne E, 1989. " Changes in Expected Security Returns, Risk, and the Level of Interest Rates," Journal of Finance, American Finance Association, vol. 44(5), pages 1191-1217, December.
    9. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    10. Ferson, Wayne E & Harvey, Campbell R, 1993. "The Risk and Predictability of International Equity Returns," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 527-566.
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    Citations

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    Cited by:

    1. Mats Wilhelmsson & Jianyu Zhao, 2018. "Risk Assessment of Housing Market Segments: The Lender’s Perspective," JRFM, MDPI, vol. 11(4), pages 1-22, October.
    2. Geonwoo Kim & Hyuncheul Lim & Sungchul Lee, 2015. "On pricing options with stressed-beta in a reduced form model," Review of Derivatives Research, Springer, vol. 18(1), pages 29-50, April.
    3. Ali Safdari-Vaighani & Davood Ahmadian & Roja Javid-Jahromi, 2021. "An Approximation Scheme for Option Pricing Under Two-State Continuous CAPM," Computational Economics, Springer;Society for Computational Economics, vol. 57(4), pages 1373-1385, April.
    4. Sofiene El Aoud & Frédéric Abergel, 2014. "Calibration of a stock's beta using options prices," Post-Print hal-01006405, HAL.
    5. Zhe Li, 2020. "Equity Option Pricing with Systematic and Idiosyncratic Volatility and Jump Risks," JRFM, MDPI, vol. 13(1), pages 1-18, January.

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    More about this item

    Keywords

    Stressed-beta model; CAPM; Stochastic volatility; Regime-switching; Option pricing; Implied volatility skews; Calibration; C02; G13;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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