A Model Free Approach to the Pricing of Downside Risk in Argentinean Stocks

Serie Documentos de Trabajo, Nro. 703, 2019

16 Pages Posted: 23 Dec 2019

See all articles by José P Dapena

José P Dapena

University of CEMA

Juan A. Serur

NYU - Courant Institute of Mathematical Sciences

Julián Ricardo Siri

University of CEMA

Date Written: November 2019

Abstract

The return dynamics of Argentina's main stock index, the SP 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 market slacks variety of hedging contracts. The basic availability of putoptions 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. Since data processing power has geometrically increased in the last decades and some mathematic formulas that were helpful for calculation had been surpassed by data gathering and processing that helps to find a better estimate when necessary, in this paper we show the point calculating protection against downside risk in the Argentinean stock market, using real data and programming an algorithm to perform calculations instead of resorting the standard Black-Scholes-Merton formulae, by means of a model free approach to acknowledge the issue.

Keywords: Asset Pricing, Options-pricing, Insurance, Capital Markets

JEL Classification: C1, C3, N2, G11

Suggested Citation

Dapena, José Pablo and Serur, Juan Andrés and Siri, Julián Ricardo, A Model Free Approach to the Pricing of Downside Risk in Argentinean Stocks (November 2019). Serie Documentos de Trabajo, Nro. 703, 2019, Available at SSRN: https://ssrn.com/abstract=3498585 or http://dx.doi.org/10.2139/ssrn.3498585

José Pablo Dapena (Contact Author)

University of CEMA ( email )

1054 Buenos Aires
Argentina

Juan Andrés Serur

NYU - Courant Institute of Mathematical Sciences ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
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Julián Ricardo Siri

University of CEMA ( email )

1054 Buenos Aires
Argentina

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