An insurance approach to the pricing of downside risk in Argentinean stocks

Downside risk stands for the risk associated with realized returns being below expected returns. When focusing on stocks, even though the drift should and tends to be positive, there are periods of stress where investors lose money. The return dynamics of Argentina's main stock index, the Mer.V...

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Detalles Bibliográficos
Autores principales:	Dapena, José P., Serur, Juan A., Siri, Julián R.
Formato:	Objeto de conferencia
Lenguaje:	Inglés
Publicado:	2018
Materias:	Ciencias Económicas asset pricing options pricing insurance capital markets
Acceso en línea:	http://sedici.unlp.edu.ar/handle/10915/164998
Aporte de:	SEDICI (UNLP) de Universidad Nacional de La Plata

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spelling	I19-R120-10915-1649982024-04-18T20:02:01Z http://sedici.unlp.edu.ar/handle/10915/164998 An insurance approach to the pricing of downside risk in Argentinean stocks Dapena, José P. Serur, Juan A. Siri, Julián R. 2018-11 2018 2024-04-18T12:45:59Z en Ciencias Económicas asset pricing options pricing insurance capital markets Downside risk stands for the risk associated with realized returns being below expected returns. When focusing on stocks, even though the drift should and tends to be positive, there are periods of stress where investors lose money. The return dynamics of Argentina's main stock index, the Mer.Val., show a high level of volatility, signaling a higher degree of downside risk. To hedge against that specific risk, investors could buy put options. However, the Argentinean capital markets lacks variety of hedging contracts. The basic availability of put options depends on the possibility of short selling the underlying security, i.e. transfer risk to a third party, something not properly developed in the domestic market. In this paper we adopt a different approach to solve the issue, more inclined towards self-insurance. We aim to calculate the minimum capital a put option seller must hold as collateral, to provide insurance to the market, and hence derive the price of the instrument as the required value that must be charged for that purpose. In that way, we provide a downside-risk hedge against adverse stock index price movements. Facultad de Ciencias Económicas Objeto de conferencia Objeto de conferencia http://creativecommons.org/licenses/by-nc-sa/4.0/ Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) application/pdf
institution	Universidad Nacional de La Plata
institution_str	I-19
repository_str	R-120
collection	SEDICI (UNLP)
language	Inglés
topic	Ciencias Económicas asset pricing options pricing insurance capital markets
spellingShingle	Ciencias Económicas asset pricing options pricing insurance capital markets Dapena, José P. Serur, Juan A. Siri, Julián R. An insurance approach to the pricing of downside risk in Argentinean stocks
topic_facet	Ciencias Económicas asset pricing options pricing insurance capital markets
description	Downside risk stands for the risk associated with realized returns being below expected returns. When focusing on stocks, even though the drift should and tends to be positive, there are periods of stress where investors lose money. The return dynamics of Argentina's main stock index, the Mer.Val., show a high level of volatility, signaling a higher degree of downside risk. To hedge against that specific risk, investors could buy put options. However, the Argentinean capital markets lacks variety of hedging contracts. The basic availability of put options depends on the possibility of short selling the underlying security, i.e. transfer risk to a third party, something not properly developed in the domestic market. In this paper we adopt a different approach to solve the issue, more inclined towards self-insurance. We aim to calculate the minimum capital a put option seller must hold as collateral, to provide insurance to the market, and hence derive the price of the instrument as the required value that must be charged for that purpose. In that way, we provide a downside-risk hedge against adverse stock index price movements.
format	Objeto de conferencia Objeto de conferencia
author	Dapena, José P. Serur, Juan A. Siri, Julián R.
author_facet	Dapena, José P. Serur, Juan A. Siri, Julián R.
author_sort	Dapena, José P.
title	An insurance approach to the pricing of downside risk in Argentinean stocks
title_short	An insurance approach to the pricing of downside risk in Argentinean stocks
title_full	An insurance approach to the pricing of downside risk in Argentinean stocks
title_fullStr	An insurance approach to the pricing of downside risk in Argentinean stocks
title_full_unstemmed	An insurance approach to the pricing of downside risk in Argentinean stocks
title_sort	insurance approach to the pricing of downside risk in argentinean stocks
publishDate	2018
url	http://sedici.unlp.edu.ar/handle/10915/164998
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An insurance approach to the pricing of downside risk in Argentinean stocks

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