Publication
Market timing with option-implied distributions in an exponentially tempered stable Lévy market
| dc.contributor.author | Guerra, João | |
| dc.contributor.author | Guerra, Manuel | |
| dc.contributor.author | Polaski, Zachary | |
| dc.date.accessioned | 2019-02-25T14:58:28Z | |
| dc.date.available | 2019-02-25T14:58:28Z | |
| dc.date.issued | 2019-02 | |
| dc.description.abstract | This paper explores the empirical implementation of a dynamic asset allocation strategy using option-implied distributions when the underlying risky asset price is modeled by an exponential Lévy process. One month risk-neutral densities are extracted from option prices and are subsequently transformed to the risk-adjusted, or real-world densities. Optimal portfolios consisting of a risky and risk-free asset rebalanced on a monthly basis are then constructed and their performance analyzed. It is found that the portfolios formed using option-implied expectations under the Lévy market assumption, which are flexible enough to capture the higher moments of the implied distribution, are far more robust to left-tail market risks and offer statistically significant improvements to risk-adjusted performance when investor risk aversion is low, however this diminishes as risk aversion increases. | pt_PT |
| dc.description.version | info:eu-repo/semantics/publishedVersion | pt_PT |
| dc.identifier.citation | Guerra, João, Manuel Guerra e Zachary Polaski (2019). "Market timing with option-implied distributions in an exponentially tempered stable Lévy market". Instituto Superior de Economia e Gestão – REM Working paper nº 074 - 2019 | pt_PT |
| dc.identifier.issn | 2184-108X | |
| dc.identifier.uri | http://hdl.handle.net/10400.5/17445 | |
| dc.language.iso | eng | pt_PT |
| dc.peerreviewed | yes | pt_PT |
| dc.publisher | ISEG - REM - Research in Economics and Mathematics | pt_PT |
| dc.relation.ispartofseries | REM Working paper;nº 074 - 2019 | |
| dc.relation.publisherversion | https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_074_2019.pdf | pt_PT |
| dc.subject | Asset Allocation | pt_PT |
| dc.subject | Lévy Processes | pt_PT |
| dc.subject | Option-Implied Distributions | pt_PT |
| dc.subject | Portfolio Optimization | pt_PT |
| dc.title | Market timing with option-implied distributions in an exponentially tempered stable Lévy market | pt_PT |
| dc.type | working paper | |
| dspace.entity.type | Publication | |
| oaire.awardURI | info:eu-repo/grantAgreement/FCT/5876/UID%2FMulti%2F00491%2F2013/PT | |
| oaire.fundingStream | 5876 | |
| project.funder.identifier | http://doi.org/10.13039/501100001871 | |
| project.funder.name | Fundação para a Ciência e a Tecnologia | |
| rcaap.rights | openAccess | pt_PT |
| rcaap.type | workingPaper | pt_PT |
| relation.isProjectOfPublication | f4afcb8b-0070-4a90-8358-a55b4ee42956 | |
| relation.isProjectOfPublication.latestForDiscovery | f4afcb8b-0070-4a90-8358-a55b4ee42956 |