An option pricing approach to the estimation of downside risk: a European cross-country study
The purpose of this paper is to undertake a comparative study of the costs of downside protection for investors in the four major European stock markets: UK, Germany, France and Italy, and to investigate the time diversification effects in these markets by examining the variation of this cost as the...
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| Format: | Journal Article |
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Palgrave Macmillan Ltd
2008
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| Online Access: | http://hdl.handle.net/20.500.11937/26293 |
| _version_ | 1848751945543581696 |
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| author | Alles, Lakshman |
| author_facet | Alles, Lakshman |
| author_sort | Alles, Lakshman |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The purpose of this paper is to undertake a comparative study of the costs of downside protection for investors in the four major European stock markets: UK, Germany, France and Italy, and to investigate the time diversification effects in these markets by examining the variation of this cost as the investment horizon is extended. The cost of downside protection and time diversification effects are investigated by examining the properties of a protective put strategy and a capital protected equity participation strategy in each country’s stock market over investment horizons ranging from 1 to 20 years. Long-horizon investment outcomes are generated using a bootstrapping technique. Results indicate that the cost of downside protection differs from one country to another, but there is a common pattern of the cost decreasing as the investment horizon lengthens. In overall terms, the pattern of decreasing protection costs at longer investment horizons is consistent with the notion of the time diversification benefits of investment risk. |
| first_indexed | 2025-11-14T08:00:47Z |
| format | Journal Article |
| id | curtin-20.500.11937-26293 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T08:00:47Z |
| publishDate | 2008 |
| publisher | Palgrave Macmillan Ltd |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-262932017-09-13T16:08:58Z An option pricing approach to the estimation of downside risk: a European cross-country study Alles, Lakshman European stock markets protective put time diversification downside risk The purpose of this paper is to undertake a comparative study of the costs of downside protection for investors in the four major European stock markets: UK, Germany, France and Italy, and to investigate the time diversification effects in these markets by examining the variation of this cost as the investment horizon is extended. The cost of downside protection and time diversification effects are investigated by examining the properties of a protective put strategy and a capital protected equity participation strategy in each country’s stock market over investment horizons ranging from 1 to 20 years. Long-horizon investment outcomes are generated using a bootstrapping technique. Results indicate that the cost of downside protection differs from one country to another, but there is a common pattern of the cost decreasing as the investment horizon lengthens. In overall terms, the pattern of decreasing protection costs at longer investment horizons is consistent with the notion of the time diversification benefits of investment risk. 2008 Journal Article http://hdl.handle.net/20.500.11937/26293 10.1057/jdhf.2008.4 Palgrave Macmillan Ltd restricted |
| spellingShingle | European stock markets protective put time diversification downside risk Alles, Lakshman An option pricing approach to the estimation of downside risk: a European cross-country study |
| title | An option pricing approach to the estimation of downside risk: a European cross-country study |
| title_full | An option pricing approach to the estimation of downside risk: a European cross-country study |
| title_fullStr | An option pricing approach to the estimation of downside risk: a European cross-country study |
| title_full_unstemmed | An option pricing approach to the estimation of downside risk: a European cross-country study |
| title_short | An option pricing approach to the estimation of downside risk: a European cross-country study |
| title_sort | option pricing approach to the estimation of downside risk: a european cross-country study |
| topic | European stock markets protective put time diversification downside risk |
| url | http://hdl.handle.net/20.500.11937/26293 |