re : efa meetings hey vince ,
thanks for your reply . i ' ll see what becomes of the session and keep you
informed . as to the paper , tim crack and i have a revised version of the
paper i gave you . we have since found out that by using certainty
equivalence , our model is more robust . for example , if one has an asset
pricing model that incorporates mean , variance , and skewness ( harvey and
siddique , jf june , 2000 ) and a binomial model that incorporates mean ,
variance , and skewness ( johnson , paulukiewicz , and mehta , rqfa , 1997 ) , our
model allows you to price options under the real world measure . the
benefit is that one can take all of the model parameters from historical
data that is non - risk neutralized .
from a pricing perspective , there isn ' t a tremendous benefit in a
mean - variance world ( variance stays the same in risk neutral or risky
measure ) . however , in the mean - variance - skewness world , there is a benefit
because we do not believe ( although we ' re still hunting down an appropriate
cite ) skewness is the same under risk - neutral and risky measure . given we
can only measure the skewness in our risky world , our model becomes much
more significant .
i would certainly appreciate comments on the version of the paper you
have and would also pass on the new version of the paper if you would like
to see it .
thanks again ,
tom
re : efa meetings
hey vince ,
thanks for your reply . i ' ll see what becomes of the session and keep you
informed . as to the paper , tim crack and i have a revised version of the
paper i gave you . we have since found out that by using certainty
equivalence , our model is more robust . for example , if one has an asset
pricing model that incorporates mean , variance , and skewness ( harvey and
siddique , jf june , 2000 ) and a binomial model that incorporates mean ,
variance , and skewness ( johnson , paulukiewicz , and mehta , rqfa , 1997 ) , our
model allows you to price options under the real world measure . the
benefit is that one can take all of the model parameters from historical
data that is non - risk neutralized .
from a pricing perspective , there isn ' t a tremendous benefit in a
mean - variance world ( variance stays the same in risk neutral or risky
measure ) . however , in the mean - variance - skewness world , there is a benefit
because we do not believe ( although we ' re still hunting down an appropriate
cite ) skewness is the same under risk - neutral and risky measure . given we
can only measure the skewness in our risky world , our model becomes much
more significant .
i would certainly appreciate comments on the version of the paper you
have and would also pass on the new version of the paper if you would like
to see it .
thanks again ,
tom