This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices follow geometric Brownian motion dynamics, the ranking mechanism can produce the observed term structure of at-the-money (ATM) implied volatility skew for equity indexes. Our proposed models showcase the ability to reconcile two seemingly contradictory features found in empirical data from equity markets: the long memory of volatilities and the power law of ATM skews. Furthermore, the models allow for the capture of a novel phenomenon termed the quasi-blow-up phenomenon.
{"title":"On short-time behavior of implied volatility in a market model with indexes","authors":"Huy N. Chau, Duy Nguyen, Thai Nguyen","doi":"arxiv-2402.16509","DOIUrl":"https://doi.org/arxiv-2402.16509","url":null,"abstract":"This paper investigates short-term behaviors of implied volatility of\u0000derivatives written on indexes in equity markets when the index processes are\u0000constructed by using a ranking procedure. Even in simple market settings where\u0000stock prices follow geometric Brownian motion dynamics, the ranking mechanism\u0000can produce the observed term structure of at-the-money (ATM) implied\u0000volatility skew for equity indexes. Our proposed models showcase the ability to\u0000reconcile two seemingly contradictory features found in empirical data from\u0000equity markets: the long memory of volatilities and the power law of ATM skews.\u0000Furthermore, the models allow for the capture of a novel phenomenon termed the\u0000quasi-blow-up phenomenon.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"65 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139979642","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper is a supplement to our recent paper ``Alternative models for FX, arbitrage opportunities and efficient pricing of double barrier options in L'evy models". We introduce the class of regime-switching L'evy models with memory, which take into account the evolution of the stochastic parameters in the past. This generalization of the class of L'evy models modulated by Markov chains is similar in spirit to rough volatility models. It is flexible and suitable for application of the machine-learning tools. We formulate the modification of the numerical method in ``Alternative models for FX, arbitrage opportunities and efficient pricing of double barrier options in L'evy models", which has the same number of the main time-consuming blocks as the method for Markovian regime-switching models.
{"title":"Alternative models for FX: pricing double barrier options in regime-switching Lévy models with memory","authors":"Svetlana Boyarchenko, Sergei Levendorskiĭ","doi":"arxiv-2402.16724","DOIUrl":"https://doi.org/arxiv-2402.16724","url":null,"abstract":"This paper is a supplement to our recent paper ``Alternative models for FX,\u0000arbitrage opportunities and efficient pricing of double barrier options in\u0000L'evy models\". We introduce the class of regime-switching L'evy models with\u0000memory, which take into account the evolution of the stochastic parameters in\u0000the past. This generalization of the class of L'evy models modulated by Markov\u0000chains is similar in spirit to rough volatility models. It is flexible and\u0000suitable for application of the machine-learning tools. We formulate the\u0000modification of the numerical method in ``Alternative models for FX, arbitrage\u0000opportunities and efficient pricing of double barrier options in L'evy\u0000models\", which has the same number of the main time-consuming blocks as the\u0000method for Markovian regime-switching models.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"2015 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139979187","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston models, covering the rough Heston model. We are able to derive semi-closed formulas for the prices of geometric Asian options with fixed and floating strikes for this class of stochastic volatility models. These formulas require the explicit calculation of the conditional joint Fourier transform of the logarithm of the stock price and the logarithm of the geometric mean of the stock price over time. Linking our problem to the theory of affine Volterra processes, we find a representation of this Fourier transform as a suitably constructed stochastic exponential, which depends on the solution of a Riccati-Volterra equation. Finally we provide a numerical study for our results in the rough Heston model.
{"title":"Pricing of geometric Asian options in the Volterra-Heston model","authors":"Florian Aichinger, Sascha Desmettre","doi":"arxiv-2402.15828","DOIUrl":"https://doi.org/arxiv-2402.15828","url":null,"abstract":"Geometric Asian options are a type of options where the payoff depends on the\u0000geometric mean of the underlying asset over a certain period of time. This\u0000paper is concerned with the pricing of such options for the class of\u0000Volterra-Heston models, covering the rough Heston model. We are able to derive\u0000semi-closed formulas for the prices of geometric Asian options with fixed and\u0000floating strikes for this class of stochastic volatility models. These formulas\u0000require the explicit calculation of the conditional joint Fourier transform of\u0000the logarithm of the stock price and the logarithm of the geometric mean of the\u0000stock price over time. Linking our problem to the theory of affine Volterra\u0000processes, we find a representation of this Fourier transform as a suitably\u0000constructed stochastic exponential, which depends on the solution of a\u0000Riccati-Volterra equation. Finally we provide a numerical study for our results\u0000in the rough Heston model.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139978705","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We derive the short-maturity asymptotics for option prices in the local volatility model in a new short-maturity limit $Tto 0$ at fixed $rho = (r-q) T$, where $r$ is the interest rate and $q$ is the dividend yield. In cases of practical relevance $rho$ is small, however our result holds for any fixed $rho$. The result is a generalization of the Berestycki-Busca-Florent formula for the short-maturity asymptotics of the implied volatility which includes interest rates and dividend yield effects of $O(((r-q) T)^n)$ to all orders in $n$. We obtain analytical results for the ATM volatility and skew in this asymptotic limit. Explicit results are derived for the CEV model. The asymptotic result is tested numerically against exact evaluation in the square-root model model $sigma(S)=sigma/sqrt{S}$, which demonstrates that the new asymptotic result is in very good agreement with exact evaluation in a wide range of model parameters relevant for practical applications.
{"title":"Short-maturity asymptotics for option prices with interest rates effects","authors":"Dan Pirjol, Lingjiong Zhu","doi":"arxiv-2402.14161","DOIUrl":"https://doi.org/arxiv-2402.14161","url":null,"abstract":"We derive the short-maturity asymptotics for option prices in the local\u0000volatility model in a new short-maturity limit $Tto 0$ at fixed $rho = (r-q)\u0000T$, where $r$ is the interest rate and $q$ is the dividend yield. In cases of\u0000practical relevance $rho$ is small, however our result holds for any fixed\u0000$rho$. The result is a generalization of the Berestycki-Busca-Florent formula\u0000for the short-maturity asymptotics of the implied volatility which includes\u0000interest rates and dividend yield effects of $O(((r-q) T)^n)$ to all orders in\u0000$n$. We obtain analytical results for the ATM volatility and skew in this\u0000asymptotic limit. Explicit results are derived for the CEV model. The\u0000asymptotic result is tested numerically against exact evaluation in the\u0000square-root model model $sigma(S)=sigma/sqrt{S}$, which demonstrates that\u0000the new asymptotic result is in very good agreement with exact evaluation in a\u0000wide range of model parameters relevant for practical applications.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"187 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139953613","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Andrzej Daniluk, Evgeny Lakshtanov, Rafal Muchorski
We present a novel technique of Monte Carlo error reduction that finds direct application in option pricing and Greeks estimation. The method is applicable to any LSV modelling framework and concerns a broad class of payoffs, including path-dependent and multi-asset cases. Most importantly, it allows to reduce the Monte Carlo error even by an order of magnitude, which is shown in several numerical examples.
{"title":"Denoised Monte Carlo for option pricing and Greeks estimation","authors":"Andrzej Daniluk, Evgeny Lakshtanov, Rafal Muchorski","doi":"arxiv-2402.12528","DOIUrl":"https://doi.org/arxiv-2402.12528","url":null,"abstract":"We present a novel technique of Monte Carlo error reduction that finds direct\u0000application in option pricing and Greeks estimation. The method is applicable\u0000to any LSV modelling framework and concerns a broad class of payoffs, including\u0000path-dependent and multi-asset cases. Most importantly, it allows to reduce the\u0000Monte Carlo error even by an order of magnitude, which is shown in several\u0000numerical examples.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"280 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139922011","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study proposes a new exact simulation scheme of the Ornstein-Uhlenbeck driven stochastic volatility model. With the Karhunen-Lo`eve expansions, the stochastic volatility path following the Ornstein-Uhlenbeck process is expressed as a sine series, and the time integrals of volatility and variance are analytically derived as the sums of independent normal random variates. The new method is several hundred times faster than Li and Wu [Eur. J. Oper. Res., 2019, 275(2), 768-779] that relies on computationally expensive numerical transform inversion. The simulation algorithm is further improved with the conditional Monte-Carlo method and the martingale-preserving control variate on the spot price.
本研究提出了一种新的奥恩斯坦-乌伦贝克驱动随机波动率模型精确模拟方案。通过卡胡宁-洛夫展开，Ornstein-Uhlenbeck 过程的随机波动率路径被表达为正弦序列，波动率和方差的时间积分被解析为独立正态随机变量之和。新方法比李和吴[Eur. J. Oper. Res., 2019, 275(2), 768-779]的方法快几百倍，后者依赖于计算昂贵的数值变换反演。利用条件蒙特卡洛法和现货价格的马氏保值控制变量，进一步改进了模拟算法。
{"title":"Exact simulation scheme for the Ornstein-Uhlenbeck driven stochastic volatility model with the Karhunen-Loève expansions","authors":"Jaehyuk Choi","doi":"arxiv-2402.09243","DOIUrl":"https://doi.org/arxiv-2402.09243","url":null,"abstract":"This study proposes a new exact simulation scheme of the Ornstein-Uhlenbeck\u0000driven stochastic volatility model. With the Karhunen-Lo`eve expansions, the\u0000stochastic volatility path following the Ornstein-Uhlenbeck process is\u0000expressed as a sine series, and the time integrals of volatility and variance\u0000are analytically derived as the sums of independent normal random variates. The\u0000new method is several hundred times faster than Li and Wu [Eur. J. Oper. Res.,\u00002019, 275(2), 768-779] that relies on computationally expensive numerical\u0000transform inversion. The simulation algorithm is further improved with the\u0000conditional Monte-Carlo method and the martingale-preserving control variate on\u0000the spot price.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139772641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Francesca Cibrario, Or Samimi, Giacomo Ranieri, Emanuele Dri, Mattia Ippoliti, Ron Cohen, Christian Mattia, Bartolomeo Montrucchio, Amir Naveh, Davide Corbelletto
This work introduces a novel approach to price rainbow options, a type of path-independent multi-asset derivatives, with quantum computers. Leveraging the Iterative Quantum Amplitude Estimation method, we present an end-to-end quantum circuit implementation, emphasizing efficiency by delaying the transition to price space. Moreover, we analyze two different amplitude loading techniques for handling exponential functions. Experiments on the IBM QASM simulator validate our quantum pricing model, contributing to the evolving field of quantum finance.
这项研究介绍了一种利用量子计算机为彩虹期权（一种与路径无关的多资产衍生品）定价的新方法。利用迭代量子振幅估计方法，我们提出了一种端到端的量子电路实现方法，通过延迟向价格空间的转换来强调效率。此外，我们还分析了处理指数函数的两种不同振幅加载技术。在 IBM QASMsimulator 上的实验验证了我们的量子定价模型，为量子金融领域的发展做出了贡献。
{"title":"Quantum Amplitude Loading for Rainbow Options Pricing","authors":"Francesca Cibrario, Or Samimi, Giacomo Ranieri, Emanuele Dri, Mattia Ippoliti, Ron Cohen, Christian Mattia, Bartolomeo Montrucchio, Amir Naveh, Davide Corbelletto","doi":"arxiv-2402.05574","DOIUrl":"https://doi.org/arxiv-2402.05574","url":null,"abstract":"This work introduces a novel approach to price rainbow options, a type of\u0000path-independent multi-asset derivatives, with quantum computers. Leveraging\u0000the Iterative Quantum Amplitude Estimation method, we present an end-to-end\u0000quantum circuit implementation, emphasizing efficiency by delaying the\u0000transition to price space. Moreover, we analyze two different amplitude loading\u0000techniques for handling exponential functions. Experiments on the IBM QASM\u0000simulator validate our quantum pricing model, contributing to the evolving\u0000field of quantum finance.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"18 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139760302","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Early-stage firms play a significant role in driving innovation and creating new products and services, especially for cybersecurity. Therefore, evaluating their performance is crucial for investors and policymakers. This work presents a financial evaluation of early-stage firms' performance in 19 cybersecurity sectors using a private-equity dataset from 2010 to 2022 retrieved from Crunchbase. We observe firms, their primary and secondary activities, funding rounds, and pre and post-money valuations. We compare cybersecurity sectors regarding the amount raised over funding rounds and post-money valuations while inferring missing observations. We observe significant investor interest variations across categories, periods, and locations. In particular, we find the average capital raised (valuations) to range from USD 7.24 mln (USD 32.39 mln) for spam filtering to USD 45.46 mln (USD 447.22 mln) for the private cloud sector. Next, we assume a log process for returns computed from post-money valuations and estimate the expected returns, systematic and specific risks, and risk-adjusted returns of investments in early-stage firms belonging to cybersecurity sectors. Again, we observe substantial performance variations with annualized expected returns ranging from 9.72% for privacy to 177.27% for the blockchain sector. Finally, we show that overall, the cybersecurity industry performance is on par with previous results found in private equity. Our results shed light on the performance of cybersecurity investments and, thus, on investors' expectations about cybersecurity.
{"title":"Measuring the performance of investments in information security startups: An empirical analysis by cybersecurity sectors using Crunchbase data","authors":"Loïc Maréchal, Alain Mermoud, Dimitri Percia David, Mathias Humbert","doi":"arxiv-2402.04765","DOIUrl":"https://doi.org/arxiv-2402.04765","url":null,"abstract":"Early-stage firms play a significant role in driving innovation and creating\u0000new products and services, especially for cybersecurity. Therefore, evaluating\u0000their performance is crucial for investors and policymakers. This work presents\u0000a financial evaluation of early-stage firms' performance in 19 cybersecurity\u0000sectors using a private-equity dataset from 2010 to 2022 retrieved from\u0000Crunchbase. We observe firms, their primary and secondary activities, funding\u0000rounds, and pre and post-money valuations. We compare cybersecurity sectors\u0000regarding the amount raised over funding rounds and post-money valuations while\u0000inferring missing observations. We observe significant investor interest\u0000variations across categories, periods, and locations. In particular, we find\u0000the average capital raised (valuations) to range from USD 7.24 mln (USD 32.39\u0000mln) for spam filtering to USD 45.46 mln (USD 447.22 mln) for the private cloud\u0000sector. Next, we assume a log process for returns computed from post-money\u0000valuations and estimate the expected returns, systematic and specific risks,\u0000and risk-adjusted returns of investments in early-stage firms belonging to\u0000cybersecurity sectors. Again, we observe substantial performance variations\u0000with annualized expected returns ranging from 9.72% for privacy to 177.27%\u0000for the blockchain sector. Finally, we show that overall, the cybersecurity\u0000industry performance is on par with previous results found in private equity.\u0000Our results shed light on the performance of cybersecurity investments and,\u0000thus, on investors' expectations about cybersecurity.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"64 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139760292","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider a stochastic volatility model where the dynamics of the volatility are given by a possibly infinite linear combination of the elements of the time extended signature of a Brownian motion. First, we show that the model is remarkably universal, as it includes, but is not limited to, the celebrated Stein-Stein, Bergomi, and Heston models, together with some path-dependent variants. Second, we derive the joint characteristic functional of the log-price and integrated variance provided that some infinite dimensional extended tensor algebra valued Riccati equation admits a solution. This allows us to price and (quadratically) hedge certain European and path-dependent options using Fourier inversion techniques. We highlight the efficiency and accuracy of these Fourier techniques in a comprehensive numerical study.
{"title":"Signature volatility models: pricing and hedging with Fourier","authors":"Eduardo Abi Jaber, Louis-Amand Gérard","doi":"arxiv-2402.01820","DOIUrl":"https://doi.org/arxiv-2402.01820","url":null,"abstract":"We consider a stochastic volatility model where the dynamics of the\u0000volatility are given by a possibly infinite linear combination of the elements\u0000of the time extended signature of a Brownian motion. First, we show that the\u0000model is remarkably universal, as it includes, but is not limited to, the\u0000celebrated Stein-Stein, Bergomi, and Heston models, together with some\u0000path-dependent variants. Second, we derive the joint characteristic functional\u0000of the log-price and integrated variance provided that some infinite\u0000dimensional extended tensor algebra valued Riccati equation admits a solution.\u0000This allows us to price and (quadratically) hedge certain European and\u0000path-dependent options using Fourier inversion techniques. We highlight the\u0000efficiency and accuracy of these Fourier techniques in a comprehensive\u0000numerical study.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"100 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139760370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Namasi G. Sankar, Suryadeepto Nag, Siddhartha P. Chakrabarty, Sankarshan Basu
In the context of whether investors are aware of carbon-related risks, it is often hypothesized that there may be a carbon premium in the value of stocks of firms, conferring an abnormal excess value to firms' shares as a form of compensation to investors for their transition risk exposure through the ownership of carbon instensive stocks. However, there is little consensus in the literature regarding the existence of such a premium. Moreover few studies have examined whether the correlation that is often observed is actually causal. The pertinent question is whether more polluting firms give higher returns or do firms with high returns have less incentive to decarbonize? In this study, we investigate whether firms' emissions is causally linked to the presence of a carbon premium in a panel of 141 firms listed in the S&P500 index using fixed-effects analysis, with propensity score weighting to control for selection bias in which firms increase their emissions. We find that there is a statistically significant positive carbon premium associated with Scope 1 emissions, while there is no significant premium associated with Scope 2 emissions, implying that risks associated with direct emissions by the firm are priced, while bought emissions are not.
{"title":"The Carbon Premium: Correlation or Causation? Evidence from S&P 500 Companies","authors":"Namasi G. Sankar, Suryadeepto Nag, Siddhartha P. Chakrabarty, Sankarshan Basu","doi":"arxiv-2401.16455","DOIUrl":"https://doi.org/arxiv-2401.16455","url":null,"abstract":"In the context of whether investors are aware of carbon-related risks, it is\u0000often hypothesized that there may be a carbon premium in the value of stocks of\u0000firms, conferring an abnormal excess value to firms' shares as a form of\u0000compensation to investors for their transition risk exposure through the\u0000ownership of carbon instensive stocks. However, there is little consensus in\u0000the literature regarding the existence of such a premium. Moreover few studies\u0000have examined whether the correlation that is often observed is actually\u0000causal. The pertinent question is whether more polluting firms give higher\u0000returns or do firms with high returns have less incentive to decarbonize? In\u0000this study, we investigate whether firms' emissions is causally linked to the\u0000presence of a carbon premium in a panel of 141 firms listed in the S&P500\u0000index using fixed-effects analysis, with propensity score weighting to control\u0000for selection bias in which firms increase their emissions. We find that there\u0000is a statistically significant positive carbon premium associated with Scope 1\u0000emissions, while there is no significant premium associated with Scope 2\u0000emissions, implying that risks associated with direct emissions by the firm are\u0000priced, while bought emissions are not.","PeriodicalId":501355,"journal":{"name":"arXiv - QuantFin - Pricing of Securities","volume":"11 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-01-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139646209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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