Young Ho Eom and Woon Wook Jang
This paper investigates empirically the modelling issues for the stochastic processes underlying KOSPI200 index options. Empirical results show that we need to incorporate two…
Abstract
This paper investigates empirically the modelling issues for the stochastic processes underlying KOSPI200 index options. Empirical results show that we need to incorporate two factor stochastic volatility processes to have a good option pricing performance. However, the number of the leverage channel is not an important issue for the modelling of the KOSPI200 index options. Our results also show that the models with finite activity large jumps outperform that with infinite activity small jumps for the financial crisis period. On the while, for the pre-crisis period, there is no clear superiority or inferiority between both jumps models.
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Young Ho Eom and Woon Wook Jang
Although the V-KOSPI 200 Futures markets opened in November 2014, trading has not been active until recently. One of the reasons for the illiquidity is due to the lack of a market…
Abstract
Although the V-KOSPI 200 Futures markets opened in November 2014, trading has not been active until recently. One of the reasons for the illiquidity is due to the lack of a market consensus on the stochastic process model for the underlying volatility index (V-KOSPI 200). Given this fact, there is no theoretical pricing model that can be used for the determination of the benchmark price for the V-KOSPI 200 Futures. In this paper, we use the generalized method of moments method to search for a model that fits well with the time series of V-KOSPI 200 under the historical measure. In addition, we compare the performance of each model for the pricing of the V-KOSPI 200 Futures under the risk neutral measure. In the empirical analysis, we find that the CEV (constant elasticity of variance) parameter with the value about 1.5 is needed to price both the underlying V-KOSPI 200 process (under the physical measure) and the V-KOSPI 200 Futures (under the risk neutral measure). We also find that the mean reversion property is necessary to explain the dynamics of V-KOSPI 200.
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Woon Wook Jang and Jaehoon Hahn
This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which…
Abstract
This paper examines the interaction between monetary policy and the macroeconomy using a macro-finance term structure model of Joslin, Priebsch, and Singleton (2012), in which macroeconomic risks are not assumed to be spanned by information about the shape of the yield curve. For model estimation, we apply the Kalman filter to a large number of macroeconomic time series data grouped into output, inflation, and market stress categories and extract three common factors. For the factors determining the shape of the yield curve, we use the call rate, the spread between 10-year government bond yield and the call rate, and a combination of the call rate, 2- and 10-year government bond yields as proxies for the level, slope, and curvature factors. We interpret the call rate as a proxy for both the short rate and the instrument of monetary policy. Empirical results show that the macroeconomic factors have a significant impact on the risk premium associated with monetary policy shocks. Furthermore, we find that monetary policy shocks increase the term premium, which in turn affects the factors determining the yield curve, and such effects on the shape of the yield curve feeds back into the macroeconomic factors. Taken together, empirical findings in this paper can be interpreted as evidence supporting the term premium channel (Ferman, 2011) of monetary policy transmission mechanism.
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Young Ho Eom, Woon Wook Jang and Seunghyun Kim
This study looks at the characteristics and current status of retail structured product market of Korea and tries to explain, in particular, issues related to issue price, cost of…
Abstract
This study looks at the characteristics and current status of retail structured product market of Korea and tries to explain, in particular, issues related to issue price, cost of hedging, and overpricing. We also analyzed the perspective of the government and the related regulatory policies. We examined various performance measures for portfolios composed of the KOSPI200 Covered Call Index and other assets in order to change the viewpoint of the authorities that the trading of structured products, such as ELS (equity-linked securities) and DLS (debt-linked securities), is in fact not a zero-sum game between the issuers and investors. The empirical results show that the KOSPI200 Covered Call Index has a superior performance compared to the KOSPI200 Index and the others. In addition, from the perspective of certainty equivalent excess returns, the KOSPI200 Covered Call Index also displays the possibility of improving the utility level of risk-averse retail investors. However, it is difficult in reality for individual investors to construct efficient portfolios that employ covered call strategies using options. Hence, individual investors can form optimal portfolios that benefit indirectly from such covered call strategies via investment in financial derivative products issued by securities firms that are able to more easily utilize investment strategies that incorporate options to form optimum portfolios. This means that both the issuer and investor can profit from these financial derivative products and, therefore, it is not a zero-sum game.
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Bon Il Ku, Young Ho Eom and Woon Wook Jang
We study an efficient numerical method for pricing European options when the dynamics of the underlying asset are described by Levy processes. In this case. we can write a…
Abstract
We study an efficient numerical method for pricing European options when the dynamics of the underlying asset are described by Levy processes. In this case. we can write a characteristic function solution for a specific Levy option model and then take its inversion numerically. Specifically we use Variance Gamma process as an example of Levy option model and consider various characteristic function representation forms of European option price such as Carr and Madan (1999), Bakshi and Madan (2000). and Lewis (2001). Fast Fourier Transform method is applied to solve the numerical inversion problem with parameters for the KOSPI 200 options data. After analysing the problems in the FFT method, we propose alternative numerical inversion method, Gaussian Quadrature. This paper reports that Gaussian Quadrature numerical inversion method with the representation form of Bakshi & Madan (2000) is more efficient and accurate than other alternatives considered in this paper.
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Young Ho Eom and Woon Wook Jang
This study examines whether the variance risk is a priced risk factor in Korea using the over-the-counter variance swap quotes and realized variance data. We also study the term…
Abstract
This study examines whether the variance risk is a priced risk factor in Korea using the over-the-counter variance swap quotes and realized variance data. We also study the term structure of variance risk premium. The empirical results show that the model with 2 stochastic variance risk factors with jumps in return is required to fit the variance swap and realized variance data. The analyses with the estimated models suggest that the variance risk premium in Korea are highly negative and the size of the premium increase with the maturities, meaning that risk averse investors in Korea are willing to pay a premium to hedge variance risk.
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The purpose of this study is to examine the effects of monetary policy on equity returns by applying an alternative econometric approach. Campbell and Ammer (1993) decomposed…
Abstract
The purpose of this study is to examine the effects of monetary policy on equity returns by applying an alternative econometric approach. Campbell and Ammer (1993) decomposed unexpected equity excess returns into three news components: risk premium news, real interest rate news and cash-flow news. The literature has determined the monetary policy (MP) effects on these news components. The authors propose an alternative MP shock identification approach to analyze the MP effects on the above-mentioned news components under a structural vector autoregression (SVAR) setup. Under this approach, one can apply an MP indicator in the SVAR, which helps forecast equity excess returns along with its external instruments for identification. Further, this study uses the various recently proposed measures of exogenous MP shocks and Fed information shocks as external instruments, and shows the different patterns of the news components' responses depending on the information in the applied instruments.
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Jun Sik Kim and Sol Kim
This paper investigates a retrospective on the Journal of Derivatives and Quantitative Studies (JDQS) on its 30th anniversary based on bibliometric. JDQSs yearly publications…
Abstract
This paper investigates a retrospective on the Journal of Derivatives and Quantitative Studies (JDQS) on its 30th anniversary based on bibliometric. JDQSs yearly publications, citations, impact factors, and centrality indices grew up in early 2010s, and diminished in 2020. Keyword network analysis reveals the JDQS's main keywords including behavioral finance, implied volatility, information asymmetry, price discovery, KOSPI200 futures, volatility, and KOSPI200 options. Citations of JDQS articles are mainly driven by article age, demeaned age squared, conference, nonacademic authors and language. In comparison between number of views and downloads for JDQS articles, we find that recent changes in publisher and editorial and publishing policies have increased visibility of JDQS.
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Sukanya Wareebor, Chompoonut Suttikun and Patcharaporn Mahasuweerachai
Consumer behavior is evolving rapidly due to the increasing role of technology in daily life. Online food ordering has emerged as a key channel in this changing landscape. This…
Abstract
Purpose
Consumer behavior is evolving rapidly due to the increasing role of technology in daily life. Online food ordering has emerged as a key channel in this changing landscape. This paper investigates the relationships between online promotions, consumer skepticism, information sharing on social media and the intention to purchase food and beverages through online delivery services.
Design/methodology/approach
Measures were developed based on a review of existing literature. Data from 402 participants were analyzed using Structural Equation Modeling (SEM).
Findings
The study reveals that online promotions significantly impact consumers' sharing of restaurant posts. Additionally, consumer skepticism about online food sales affects both their sharing behavior and their intention to purchase online. Engagement in sharing restaurant posts online is a strong predictor of online food purchasing intentions.
Practical implications
The findings offer valuable insights for restaurant operators, policymakers and technology developers in the competitive online food delivery sector. They emphasize the importance of implementing innovative promotions and crafting appealing food presentations. These strategies can accelerate customer decision-making, attract new customers and contribute to market expansion and customer base sustainability.
Originality/value
This research provides significant insights for restaurant owners and contributes to the limited literature on online promotions, consumer skepticism and information sharing in the restaurant industry. It also lays the groundwork for future studies aimed at deepening understanding in this field.