scholarly journals The Term Structure of Variance Swap Rates and Optimal Variance Swap Investments

2010 ◽  
Vol 45 (5) ◽  
pp. 1279-1310 ◽  
Author(s):  
Daniel Egloff ◽  
Markus Leippold ◽  
Liuren Wu
Keyword(s):  
Term Structure ◽  
Investment Decision ◽  
Market Price ◽  
Optimal Investment ◽  
Stock Index ◽  
Structure Variation ◽  
Variance Swap ◽  
Variance Risk ◽  
Negative Estimate ◽  
Swap Rates

AbstractThis paper performs specification analysis on the term structure of variance swap rates on the S&P 500 index and studies the optimal investment decision on the variance swaps and the stock index. The analysis identifies 2 stochastic variance risk factors, which govern the short and long end of the variance swap term structure variation, respectively. The highly negative estimate for the market price of variance risk makes it optimal for an investor to take short positions in a short-term variance swap contract, long positions in a long-term variance swap contract, and short positions in the stock index.

The Variance Swaps based on KOSPI200 Index and the Term Structure of Variance Risk Premium

2013 ◽  
Vol 21 (4) ◽  
pp. 435-463
Author(s):  
Young Ho Eom ◽  
Woon Wook Jang
Keyword(s):  
Risk Factors ◽  
Term Structure ◽  
Risk Premium ◽  
Risk Averse ◽  
Realized Variance ◽  
Over The Counter ◽  
Variance Swaps ◽  
Variance Swap ◽  
Variance Risk Premium ◽  
Variance Risk

This study examines whether the variance risk is a priced risk factor in Korea using the over-the-counter variance swap quotes and realized variance data. We also study the term structure of variance risk premium. The empirical results show that the model with 2 stochastic variance risk factors with jumps in return is required to fit the variance swap and realized variance data. The analyses with the estimated models suggest that the variance risk premium in Korea are highly negative and the size of the premium increase with the maturities, meaning that risk averse investors in Korea are willing to pay a premium to hedge variance risk.

scholarly journals INVESTMENT, IRREVERSIBILITY, AND UNCERTAINTY IN ENERGY BEET–BASED ETHANOL

2016 ◽  
Vol 48 (4) ◽  
pp. 403-429 ◽  
Author(s):  
KASSU WAMISHO HOSSISO ◽  
DAVID RIPPLINGER
Keyword(s):  
Real Options ◽  
Investment Decision ◽  
Market Price ◽  
Decision Rules ◽  
Optimal Investment ◽  
Irreversible Investment ◽  
Energy Beet ◽  
Gross Margins ◽  
Entry Decisions

Abstract:This study evaluates optimal investment decision rules for an energy beet ethanol firm to exercise the option to invest, mothball, reactivate, and exit the ethanol market, considering uncertainty and volatility in the market price of ethanol, feedstock, and irreversible investment. A real options framework is used to compute gross margins of ethanol that trigger entry into and exit from the ethanol market. Results show that volatility in ethanol gross margins has much greater effects on exit and entry decisions than investment costs, and it also causes firms to wait longer before entering the ethanol market and, once active, to wait longer before exiting.

scholarly journals European Option Based R&D Investment Decision Making under Uncertainties

2015 ◽  
Vol 2015 ◽  
pp. 1-6
Author(s):  
Qing Miao ◽  
Boyang Cao ◽  
Minghui Jiang
Keyword(s):  
Decision Making ◽  
Research And Development ◽  
Joint Venture ◽  
Investment Decision ◽  
Optimal Investment ◽  
European Option ◽  
Project Investment ◽  
Research Joint Venture ◽  
Investment Decision Making ◽  
D Investment

This paper establishes the payoff models of the European option for research and development (R&D) projects with two enterprises in a research joint venture (RJV). The models are used to assess the timing and payoffs of the R&D project investment under quantified uncertainties. After the option game, the two enterprises can make optimal investment decision for the R&D project investment in the RJV.

scholarly journals The Term Structure of the Price of Variance Risk

2015 ◽  
Author(s):  
Marianne Andries ◽  
Thomas M. Eisenbach ◽  
Martin C. Schmalz ◽  
Yichuan Wang
Keyword(s):  
Term Structure ◽  
Variance Risk

Pension plan funding and market value of the firm: the Portuguese case

2020 ◽  
Vol 47 (4) ◽  
pp. 827-847
Author(s):  
Maria Teresa Medeiros Garcia ◽  
José Amílcar Neves Domingos
Keyword(s):  
Market Price ◽  
Market Value ◽  
Pension Plan ◽  
The United States ◽  
Stock Index ◽  
Occupational Pension ◽  
Cross Sectional ◽  
Variable Effect ◽  
Content Type ◽  
Market Makers

PurposeThe objective of the paper is to test the existence of a direct effect between the funding level of a firm's pension fund and its respective market price in Portugal, from 2010 to 2015, using a selected sample of Portuguese Stock Index (PSI Geral) firms. Although this relationship has been contemplated in the literature, especially in the United States and the United Kingdom, there is no finding concerning Portugal. The study of pension assets and obligations is of particular importance to investors and market makers alike.Design/methodology/approachThe paper utilizes two distinct methods – a cross-sectional model and a variable-effect event study – to assess the hypothesis that an increase in pension deficit is reflected in the market value of a firm by a decrease of equal magnitude.FindingsThis paper finds that a firm's market value is not reduced by an increase in pension deficit and that pension liabilities are already integrated in corporate debt. These results suggest that shareholders fail to take into account occupational pension plan funding status when valuing a firm in such a way that contrasts with the normal evaluation of debt.Originality/valueTo the best of the authors' knowledge, this is the first attempt to examine this relationship in Portugal.

scholarly journals Association between Accounting Numbers and Value of Food and Beverages Firms in Nigeria

2015 ◽  
Vol 7 (12) ◽  
pp. 245
Author(s):  
Nyor Terzungwe ◽  
Nasiru Rabiu
Keyword(s):  
Value Relevance ◽  
Stock Exchange ◽  
Investment Decision ◽  
Market Price ◽  
Accounting Information ◽  
Financial Statements ◽  
Annual Reports ◽  
Market Values ◽  
Food And Beverages ◽  
Accounting Numbers

<p>The degree of statistical relationship between the contents of financial statements and market price of equity is what is termed Value relevance of accounting information. It explains stock market measures using financial information variables and it is a very useful guide to investors in pricing of shares. This study examines the extent of association between accounting information variables of earnings, dividend and book value of equity and market value of listed Food and Beverages firms in Nigeria. Data were collected from the published annual reports of the sampled firms and their market values obtained from the official daily list of the Nigerian Stock Exchange (NSE) over a period of 10 years (2001-2010). Using multivariate regression as technique for data analysis, the study established that accounting information of Food &amp; Beverages companies in Nigeria is value relevant. Accordingly, the study recommends the use of financial statements figures of Food and Beverages firms for investment decision.</p>

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