Risk-Neutral Densities and Catastrophe Events
|Professorship/Faculty:||Banking and Financial Control||Authors:||Herold, Michael ; Muck, Matthias||Title of the compilation:||Derivative Securities Pricing and Modelling||Editors:||Batten, Jonathan A.; Wagner, Niklas|
|Publisher Information:||Bingley [u.a.] : Emerald||Year of publication:||2012||Pages / Size:||S. 185 - 207||Edition:||1. ed.||ISBN:||978-1-78052-616-4||Series ; Volume:||Contemporary studies in economic and financial analysis ; 94||Year of first publication:||2012||Language(s):||English||Document Type:||Contribution to an Articlecollection||Abstract:||
In this research, we analyze the impact of catastrophe events on riskneutral
densities which can be implied from European option markets. As catastrophe events we consider the destruction of the nuclear power plant at Fukushima and the downgrading of U.S. sovereign debt in 2011. In an
event study, we analyze the impact on European blue chip index options traded at EUREX. We find that after a short adaption period, probability mass of especially risk-neutral density functions derived from long-term options is shifted toward the right side. Thus, very good states of the economy become more expensive indicating higher prices for deep out-ofthe-
money options. This signifies that there has been speculation on a recovery of the German stock market after the shocks.
|Keywords:||Risk-neutral densities, derivatives||URI:||https://fis.uni-bamberg.de/handle/uniba/444||Release Date:||7. August 2012|