Approximate Derivative Pricing for Large Classes of Homogeneous Assets with Systematic Risk
AbstractWe consider a homogeneous class of assets, whose returns are driven by an unobservable factor representing systematic risk. We derive approximated pricing formulas for the future factor values and their proxies, when the size n of the class is large. Up to order 1/n, these closed-form approximations involve well-chosen summary statistics of the basic asset returns but not the current and lagged factor values. The potential of the closed-form approximation formulas seems quite large, especially for credit risk analysis, which considers large portfolios of individual loans or corporate bonds, and for longevity risk analysis, which involves large portfolios of life insurance contracts. Copyright The Author 2011. Published by Oxford University Press. All rights reserved. For Permissions, please e-mail: email@example.com., Oxford University Press.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Society for Financial Econometrics in its journal Journal of Financial Econometrics.
Volume (Year): 9 (2011)
Issue (Month): 2 (Spring)
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://jfec.oxfordjournals.org/
More information through EDIRC
Other versions of this item:
- Patrick GAGLIARDINI & Christian GOURIEROUX, 2010. "Approximate Derivative Pricing for Large Classes of Homogeneous Assets with Systematic Risk," Working Papers, Centre de Recherche en Economie et Statistique 2010-07, Centre de Recherche en Economie et Statistique.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- M. B. Gordy & E. Lutkebohmert, 2013. "Granularity Adjustment for Regulatory Capital Assessment," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 38-77, September.
- Michael B. Gordy & James Marrone, 2010.
"Granularity adjustment for mark-to-market credit risk models,"
Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.)
2010-37, Board of Governors of the Federal Reserve System (U.S.).
- Gordy, Michael B. & Marrone, James, 2012. "Granularity adjustment for mark-to-market credit risk models," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(7), pages 1896-1910.
- Serge Darolles & Christian Gouriéroux & Emmanuelle Jay, 2012. "Robust Portfolio Allocation with Systematic Risk Contribution Restrictions," Working Papers, Centre de Recherche en Economie et Statistique 2012-35, Centre de Recherche en Economie et Statistique.
- Jean-David Fermanian, 2013. "The Limits of Granularity Adjustments," Working Papers, Centre de Recherche en Economie et Statistique 2013-27, Centre de Recherche en Economie et Statistique.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
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.