Marc Chesney, Rajna Gibson, State space symmetry and two-factor option pricing models, In: Advances in Futures and Options Research, J A I Press Inc., N/A, p. 85 - 112, 1995. (Book Chapter)
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Marc Chesney, Rajna Gibson, Robert J Elliott, Analytical solutions for the pricing of american bond and yield options, Mathematical Finance, Vol. 3 (3), 1993. (Journal Article)
In this paper we use the Cox, Ingersoll, and Ross (1985b) single-factor, term structure model and extend it to the pricing of American default-free bond puts. We provide a quasi-analytical formula for these option prices based on recently established mathematical results for Bessel bridges, coupled with the optimal stopping time method. We extend our results to another interest rate contingent claim and provide a quasi-analytical solution for American yield option prices which illustrates the flexibility of our framework. |
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Marc Chesney, Robert J Elliott, Dilip Madan, Hailiang Yang, Diffusion coefficient estimation and asset pricing when risk premia and sensitivities are time varying, Mathematical Finance, Vol. 3 (2), 1993. (Journal Article)
The exponential of a scalar diffusion is considered. Point estimates of the diffusion coefficient can be obtained by considering proportional increments of different powers of the exponential. an investigation of the minimum variance estimator gives unique optimal power. |
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Marc Chesney, Louis Scott, Pricing European currency options: a comparison of the modified Black-Scholes model and a random variance model, Journal of Financial and Quantitative Analysis, Vol. 24 (3), 1989. (Journal Article)
We use the modified Black-Scholes model and a random variance option pricing model tostudy prices of European currency options traded in Geneva. The options, which cannot be exercised early, include calls and puts on the dollar/Swiss franc exchange rate. In the empirical analysis, we examine the model fit and the biases with respect to the strike price, time to maturity, and volatility. There is some evidence of mispricing and there are small gains available by trading with the random variance model. |
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Marc Chesney, Henri Loubergé, Risk aversion and the composition of wealth in the demand for full insurance coverage, Swiss Journal of Economics and Statistics = Schweizerische Zeitschrift für Volkswirtschaft und Statistik, Vol. 122 (3), 1986. (Journal Article)
The economic literature on the demand for non-life insurance has mainly emphasized the influence of risk aversion. Under the assumption of decreasing absolute risk aversion, it has been shown that insurance should be an inferior good. Under the assumption of increasing relative risk aversion, it has been shown that the wealth elasticity of insurance should exceed one. These seemingly contradictory propositions are due to strong implicit assumptions about changes in the composition of wealth. The present paper proposes a more general model where the effects of risk aversion and of the composition of wealth are considered jointly. Necessary and sufficient conditions for a decrease in the willingness-to-insure are defined, and their implications for the interpretation of empirical results on insurance spending and risk-averse behavior are pointed out. |
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Julia Meyer, Ola Elsayed, Social Responsibility in the Time of Uncertainty: A Natural Experiment, In: -, No. -, . (Working Paper)
This paper studies social responsibility in the financial market under uncertainty. Using the COVID-19 induced stock market crash as a natural experiment, we present causal evidence for a significant market-wide increase in sentiment for and attention to socially responsible investments. An artefactual field experiment suggests three behavioral channels for this shift in preferences. First, investors view socially responsible assets as less risky and uncertain. Second, the crisis triggered an increase in prosocial preferences in general. Third, the affect heuristic, in which the emotional response acts as a mental shortcut in relation to a stimulus, triggers favorable expectations of socially responsible investment performance. Our insights provide evidence for the time varying nature of morality in the market and may explain the recently documented resilience of socially responsible stocks in times of market turmoil. |
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