Search results for "premium"
showing 10 items of 84 documents
The Fair Premium of an Equity—Linked Life and Pension Insurance
2002
An equity linked life and pension insurance contract consists of an nonlinear combination of a life and pension insurance with an investment strategy. In addition to the guaranteed payments the insured receives a bonus depending on the value of an investment strategy. The additional payment is similar to an Asian type option. Since the insurance contract combines mortality and financial risks in a nonlinear way, the value or premium of the contract must reflect these uncertainties. Within this context a premium sequence is called fair if the accumulated expected discounted premium is equal to the accumulated expected discounted payments of the contract. This paper shows the existence of a f…
Forecasting the Size Premium Over Different Horizons
2011
In this paper, we provide evidence that the small stock premium is predictable both in-sample and out-of-sample through the use of a set of lagged macroeconomic variables. We find that it is possible to forecast the size premium over time horizons that range from one month to one year. We demonstrate that the predictability of the size premium allows a portfolio manager to generate an economically and statistically significant active alpha.
Aggregation of preferences for skewed asset returns
2014
This paper characterizes the equilibrium demand and risk premiums in the presence of skewness risk. We extend the classical mean-variance two-fund separation theorem to a three-fund separation theorem. The additional fund is the skewness portfolio, i.e. a portfolio that gives the optimal hedge of the squared market return; it contributes to the skewness risk premium through co-variation with the squared market return and supports a stochastic discount factor that is quadratic in the market return. When the skewness portfolio does not replicate the squared market return, a tracking error appears; this tracking error contributes to risk premiums through kurtosis and pentosis risk if and only …
Expectations and forward risk premium in the Spanish deregulated power market
2010
Abstract Deregulation in energy markets has entailed important changes in the way agents conduct business. Price risk arises as a result of fluctuations in the future price of electricity and agents assume long or short positions in the forward and spot markets to hedge their exposure to price risk. The presence of forward risk premium in prices is evidence of the fact that agents act in the market according to risk considerations. This work aims to analyse the information content of the difference between the forward and spot prices (the so-called forward premium) regarding the agents’ decisions. We find that the sign and magnitude of the ex post forward premium depend on the unexpected va…
A Generalization of the Mean-Variance Analysis
2008
In this paper we consider a decision maker whose utility function has a kink at the reference point with different functions below and above this reference point. We also suppose that the decision maker generally distorts the objective probabilities. First we show that the expected utility function of this decision maker can be approximated by a function of mean and partial moments of distribution. This "mean-partial moments" utility generalizes not only the mean-variance utility of Tobin and Markowitz, but also the mean-semivariance utility of Markowitz. Then, in the spirit of Arrow and Pratt, we derive an expression for a risk premium when risk is small. Our analysis shows that a decision…
The response of Brent crude oil to the European central bank monetary policy
2022
Este artículo examina el impacto de las decisiones de política monetaria del Banco Central Europeo (BCE) sobre los precios del petróleo y la liquidez mediante un estudio de eventos con datos intradía. Analizamos el período de enero de 1999 a diciembre de 2020, que incluye la crisis financiera que comenzó en agosto de 2007. Nuestros resultados muestran una respuesta significativa de los rendimientos del petróleo solo durante la crisis financiera. Específicamente, encontramos que los rendimientos de los futuros de petróleo crudo Brent respondieron negativamente a variaciones inesperadas en la prima de riesgo italiana como medida de acciones de política monetaria no convencionales, y positivam…
Anatomy of Risk Premium in UK Natural Gas Futures
2015
In many futures markets, trading is concentrated in the front contract and positions are rolled-over until the strategy horizon is attained. In this paper, a pair-wise comparison between the conventional risk premium and the accrued risk premium in rolled-over positions in the front contract is carried out for UK natural gas futures. Several novel results are obtained. Firstly, and most importantly, the accrued risk premium in rollover strategies is significatively larger than conventional risk premiums and increases with the time to delivery. Specifically, for strategy horizons between three and six months, this difference increases from 1% to 10%. Secondly, it is the first time that risk …
Italian wines in the new world wine consumers countries: the case of the Russian market
2015
Over the last few decades, the wine market has been affected by a deep structural transformation due to globalization and mounting international competition. In particular, the wine demand has registered a geographical change with a fall in the traditional markets and an increase in the new markets among which Russia and China. Russia is one of the largest markets for wine on the planet, therefore, know what quality attributes are appreciated by Russian consumers is relevant in order to define effective business and marketing strategies. An hedonic price model has been used in this work in order to estimate implicit price for the main objective attributes of Italian wine sales in the Russia…
Wavelet Analysis Of Variance Risk Premium Spillovers
2013
In this paper we construct a variance risk premium spillover index among France, Germany, UK, Switzerland and the US. The variance risk premium is measured by the difference between the difference between the (square) of implied volatility and expected realized variance of the stock market for next month. We also construct a spillover index for the constituents of the variance risk premium. The series under investigation exhibit long memory properties. The construction of a total spillover indicator suggested by Diebold-Yilmaz (2009) would then rely on modeling a fractionally integrated Vector Autoregressive Model, which might be subject to errors in specifying the correct lag length and th…
Wavelet analysis of variance risk premium spillovers
2013
In this paper we construct a variance risk premium spillover index among France, Germany, UK, Switzerland and the US. The variance risk premium is measured by the difference between the difference between the (square) of implied volatility and expected realized variance of the stock market for next month. We also construct a spillover index for the constituents of the variance risk premium. The series under investigation exhibit long memory properties. The construction of a total spillover indicator suggested by Diebold-Yilmaz (2009) would then rely on modeling a fractionally integrated Vector Autoregressive Model, which might be subject to errors in specifying the correct lag length and th…