Risk-Neutral Densities and Catastrophe Events

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.

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Fakultät / Lehrstuhl:Lehrstuhl für Betriebswirtschaftslehre, insbesondere Banking und Finanzcontrolling
Autor(en): Michael Herold, Matthias Muck
Titel der Zeitschrift/Sammelwerk (English):Derivative Securities Pricing and Modelling
Editor: Jonathan A. Batten, Niklas Wagner
Edition:1. ed.
Place of publication:Bingley [u.a.]
Seitenzahl / Größe (KB):S. 185 - 207
Schriftenreihen / Serie:Contemporary studies in economic and financial analysis ; 94
Jahr der Erstpublikation / Fertigstellung:2012
Freie Schlagwort(e):Risk-neutral densities; derivatives
Document Type:Artikel in einem Sammelwerk / Postprint
Licence (German):License LogoKeine Lizenz