Publications - Lars Stentoft https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Bcontroller%5D=Publications&cHash=bbe09100675b57cd6b9a09000bf0ee58 en-us PURE Extension typo3support@science.au.dk (Web Department) 30 <![CDATA[Stationary Threshold Vector Autoregressive Models]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=c342b491-97a4-445d-b023-ee99056b977d&tx_pure_pure5%5BshowType%5D=pub&cHash=4c49d04835d4f4536b50b1ce4d71d438 Grynkiv, G., Stentoft, L. Forskning Mon, 01 Jan 2018 12:54:17 +0100 c342b491-97a4-445d-b023-ee99056b977d <![CDATA[Efficient Numerical Pricing of American Call Options using Symmetry Arguments]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=de849065-d8a0-4ea9-ae52-62601f233d54&tx_pure_pure5%5BshowType%5D=pub&cHash=c78afaaeb8fbe9bdbe86b2a05b02e1cc Stentoft, L. Forskning Tue, 01 Jan 2019 12:54:17 +0100 de849065-d8a0-4ea9-ae52-62601f233d54 <![CDATA[Consistent and Efficient Dynamic Portfolio Replication with Many Factors]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=49c230f9-e675-455b-a4a1-72b7e51ff89f&tx_pure_pure5%5BshowType%5D=pub&cHash=0f0054c385327338252fcb5633630024 Stentoft, L., Wang, S. Forskning Wed, 01 Jan 2020 12:54:17 +0100 49c230f9-e675-455b-a4a1-72b7e51ff89f <![CDATA[Dynamics of variance risk premia]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=2578fe6c-0e3b-42d9-859f-6fa4fc6d820e&tx_pure_pure5%5BshowType%5D=pub&cHash=961ac3d3eedb74497a43db05c3934784 Rombouts, J. V.K., Stentoft, L., Violante, F. This paper formulates a new dynamic model for the variance risk premium based on a state space representation of a bivariate system for the observable ex-post realized variance and the ex-ante option implied variance expectation. A regime switching structure accommodates for periods of unusually high volatility, heterogeneous dynamics and changes in the dependence between the latent states. The model allows separating the continuous component of the variance risk premium from the impact of jumps on option implied variance expectations. Using options and high frequency returns for the S&P500 index, we explain what is generating return predictability by disentangling the part of the variance risk premium associated with normal sized price fluctuations from that associated with tail events. The latter component predicts to a significant extent, and asymmetrically with respect to their sign, future market return variations.

]]>
Forskning Wed, 01 Jan 2020 12:54:17 +0100 2578fe6c-0e3b-42d9-859f-6fa4fc6d820e
<![CDATA[Pricing individual stock options using both stock and market index information]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=54003661-192d-405d-8e29-31b5c31a82ee&tx_pure_pure5%5BshowType%5D=pub&cHash=23b8fd7392f1bc58172383ccea8436bd Rombouts, J. V.K., Stentoft, L., Violante, F. When it comes to individual stock option pricing, most applications consider a univariate framework. From a theoretical point of view this is unsatisfactory as we know that the expected return of any asset is closely related to the exposure to the market risk factors. To address this, we model the evolution of the individual stock returns together with the market index returns in a flexible bivariate model in line with theory. The model parameters are estimated using both historical returns and aggregated option data from the index and the individual stocks. We assess the model performance by pricing a large set of individual stock options on 26 major US stocks over a long time period including the global financial crisis. Our results show that the losses from using a univariate formulation amounts to 11% on average when compared to our preferred bivariate specification.

]]>
Forskning Sat, 01 Feb 2020 12:54:17 +0100 54003661-192d-405d-8e29-31b5c31a82ee
<![CDATA[Variance swap payoffs, risk premia and extreme market conditions]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=8818809d-9c6d-4354-ad8c-624af21789cd&tx_pure_pure5%5BshowType%5D=pub&cHash=4fd0ea7e1273db334393ba0f476831ea Rombouts, J. V.K., Stentoft, L., Violante, F. The variance risk premium (VRP) is estimated directly from synthetic variance swap payoffs. Since variance swap payoffs are highly volatile, the VRP is extracted by using signal extraction techniques based on a state-space representation of the model in combination with a simple economic constraint. The proposed approach, only requiring option implied volatilities and daily returns for the underlying asset, provides measurement error free estimates of the part of the VRP related to normal market conditions, and allows constructing variables indicating agents’ expectations under extreme market conditions. The latter variables and the VRP generate different return predictability on the major US indices. A factor model is proposed to extract a market VRP which turns out to be priced when considering Fama and French portfolios.

]]>
Forskning Wed, 01 Jan 2020 12:54:17 +0100 8818809d-9c6d-4354-ad8c-624af21789cd
<![CDATA[Yes We Can (Price Derivatives on Survivor Indices)]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=c28b9920-1d75-4281-95cd-dcd65a711c73&tx_pure_pure5%5BshowType%5D=pub&cHash=258686ed74297f27060f6f8dac387b57 Boyer, M. M., Stentoft, L. We propose a simulation approach to value derivatives when the underlying dynamics are estimated using the survivor indices directly. Our results show that survivor forward and swap premiums increase with maturity and with the market price of risk. Our results also confirm that taking the optionality into consideration is important from a pricing perspective, for both U.S. women and men. We compare our results to what is obtained using an alternative modeling approach in which a Lee–Carter model is used to indirectly model the survivor index. Compared to this method, our estimated premiums and prices are higher for all longevity products. Moreover, comparing American-style with European-style options we find that, although the early exercise option has value when using survivor indices directly, the relative value of the early exercise option is significantly less than when the Lee–Carter model is used to indirectly model the survivor index. It follows that the assumed mortality dynamics have important implications for the term structure of forward and swap premiums and for the effect that changes in the market price of risk has on them.

]]>
Forskning Wed, 01 Mar 2017 12:54:17 +0100 c28b9920-1d75-4281-95cd-dcd65a711c73
<![CDATA[The value of multivariate model sophistication]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=c6c83776-e5cc-426c-981d-25ecb3b1f57d&tx_pure_pure5%5BshowType%5D=pub&cHash=5dea199f879c9a95ee95eeb989b11660 Rombouts, J., Stentoft, L., Violante, F. Forskning Wed, 01 Jan 2014 12:54:17 +0100 c6c83776-e5cc-426c-981d-25ecb3b1f57d <![CDATA[If we can simulate it, we can insure it]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=03a30ef2-8ca8-4889-b77f-1b58c5c83d00&tx_pure_pure5%5BshowType%5D=pub&cHash=37e4798ddf14abe172168a69e3b2b70b Boyer, M.M., Stentoft, L. Forskning Tue, 01 Jan 2013 12:54:17 +0100 03a30ef2-8ca8-4889-b77f-1b58c5c83d00 <![CDATA[Refining the least squares Monte Carlo method by imposing structure]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=e964e73b-5bba-4a15-a9b8-6a485afcf1d1&tx_pure_pure5%5BshowType%5D=pub&cHash=798787b7e6c356d24f5226945ae5f60c Létourneau, P. ., Stentoft, L. Forskning Wed, 01 Jan 2014 12:54:17 +0100 e964e73b-5bba-4a15-a9b8-6a485afcf1d1 <![CDATA[Value Function Approximation or Stopping Time Approximation]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=d077fa2a-a489-45d2-bd62-0eb2dd2d9444&tx_pure_pure5%5BshowType%5D=pub&cHash=1a5da1b8f71264ffdd37d06cebf16f89 Stentoft, L. Forskning Wed, 01 Jan 2014 12:54:17 +0100 d077fa2a-a489-45d2-bd62-0eb2dd2d9444 <![CDATA[Measuring Longevity Risk]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=d610698c-7800-488e-97f0-977a3c5f2428&tx_pure_pure5%5BshowType%5D=pub&cHash=9ac396e0d1041f6b47091f9bda86b25f Boyer, M. M., Mejza, J., Stentoft, L. Forskning Wed, 01 Jan 2014 12:54:17 +0100 d610698c-7800-488e-97f0-977a3c5f2428 <![CDATA[A Simulation-and-Regression Approach for Stochastic Dynamic Programs with Endogenous State Variable]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=fd01b259-1b08-4477-b1aa-c11e8f7769b9&tx_pure_pure5%5BshowType%5D=pub&cHash=f48324bf7a460f8ccfc720bdb419e0a7 Denault, M. ., Simonato, J., Stentoft, L. Forskning Tue, 01 Jan 2013 12:54:17 +0100 fd01b259-1b08-4477-b1aa-c11e8f7769b9 <![CDATA[Bayesian Option Pricing using Mixed Normal Heteroskedasticity Models]]> https://econ.au.dk/da/research/researchcentres/creates/people/international-fellows/lars-stentoft?tx_pure_pure5%5Baction%5D=single&tx_pure_pure5%5Bcontroller%5D=Publications&tx_pure_pure5%5Bid%5D=25f8e843-12e1-45a0-8cec-eabf246e6be2&tx_pure_pure5%5BshowType%5D=pub&cHash=2baba925b1fd6c6d49a557371a70ce28 Rombouts, J., Stentoft, L. Forskning Wed, 01 Jan 2014 12:54:17 +0100 25f8e843-12e1-45a0-8cec-eabf246e6be2