He, Y.; Rachev, S. Exploring Implied Certainty Equivalent Rates in Financial Markets: Empirical Analysis and Application to the Electric Vehicle Industry. J. Risk Financial Manag.2023, 16, 344.
He, Y.; Rachev, S. Exploring Implied Certainty Equivalent Rates in Financial Markets: Empirical Analysis and Application to the Electric Vehicle Industry. J. Risk Financial Manag. 2023, 16, 344.
He, Y.; Rachev, S. Exploring Implied Certainty Equivalent Rates in Financial Markets: Empirical Analysis and Application to the Electric Vehicle Industry. J. Risk Financial Manag.2023, 16, 344.
He, Y.; Rachev, S. Exploring Implied Certainty Equivalent Rates in Financial Markets: Empirical Analysis and Application to the Electric Vehicle Industry. J. Risk Financial Manag. 2023, 16, 344.
Abstract
In real financial markets, the certainty equivalent rate is an important factor for investors to consider. From the value of a specific company’s certainty equivalent rate, investors can judge if this company is worth investing in. In this paper, we will explore how to obtain the value of the certainty equivalent rate so that we can evaluate a given company. First, we will introduce the theoretical support of this paper, which is put-call parity. From put-call parity, we will derive the mathematical expression for the certainty equivalent rate. Second, we will use the mathematical expression for the certainty equivalent rate to perform an empirical study. We will consider some extreme examples, including some of the best- and worst-performing stocks up to this point in 2023. Based on these stocks’ data, we will visualize the performance of these stocks and explain the meaning of the data. Finally, we will apply the results to a very popular industry—the electric vehicle industry—to explore the current electric vehicle market situation in the U.S.A.
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
