 Measuring Risk Structures of Assets: P-index and C-indexKuo-Ping Chang MPRA Paper from University Library of Munich, Germany Abstract: Risk can be defined as the likelihood that you can deliver your promise. This paper has used the European put option and the European call option to construct the p-index and c-index to measure the risk levels (likelihoods) of owning or short-selling an asset when the asset provides at least � rate of return. The p-index measures the insurance fees for each insured dollar so that the asset can deliver at least � rate of return. The c-index measures the insurance fees for each dollar of the insurance deductible if the asset delivers at least � rate of return. It shows that higher p-index means higher c-index. In the binomial case with up move and down move, (1) assets having lower down move have higher p-index, i.e., higher risk for owning the assets; and (2) assets having higher up move have higher c-index, i.e., higher risk for shortselling the assets. The trinomial example however shows that the rankings of risk levels of assets' providing different rates of returns could reverse. Keywords: The put-call parity; the p-index; the c-index; risk structures of assets. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:122653 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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