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On Estimating an Asset's Implicit Beta

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  • Husmann, Sven

Abstract

Siegel (1995) has developed a technique with which the systematic risk of a security (beta) can be estimated without recourse to historical capital market data. Instead, beta is estimated implicitly from the current market prices of exchange options that enable the exchange of a security against shares on the market index. Because this type of exchange options is not currently traded on the capital markets, Siegel's technique cannot yet be used in practice. This article will show that beta can also be estimated implicitly from the current market prices of plain vanilla options, based on the Capital Asset Pricing Model.

Suggested Citation

  • Husmann, Sven, 2005. "On Estimating an Asset's Implicit Beta," Discussion Papers 238, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    • Handle: RePEc:zbw:euvwdp:238
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    References listed on IDEAS

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