show that demand-pressure effects contribute to well-known option-pricing puzzles. Indeed, time-series tests show that … pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the … option. Similarly, the demand pressure increases the price of any other option by an amount proportional to the covariance of …

Our objective in this paper is to examine whether one can use option-implied information to improve mean …-variance portfolio selection with a large number of stocks, and to document which aspects of option-implied information are most useful … empirical evidence shows that, while using the option-implied volatilities and correlations does not improve significantly the …

We develop a model for pricing risky debt and valuing credit derivatives that is easily calibrated to existing …

convexity of the pricing kernel, (c) raises option prices relative to the price of the under-lying asset and (d) raises the …Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this …

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We … by standard risk factors, and unlikely to be solely due to illiquidity. Our option-based approach also offers a novel …