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 …

, including the pricing differences between index and stock options, the cross-sectional variation in stock option expensiveness …We explore the pricing of variance risk by decomposing stocks' total variance into systematic and idiosyncratic return … an important determinant for the cross-section of expected option returns. These findings reconcile several phenomena …

metrics, we compare historical option returns to those generated by commonly used option pricing models. We find that the most …This paper studies the returns from investing in index options. Previous research documents significant average option … approach to evaluate the significance of option returns and obtain different conclusions. Instead of using these statistical …

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 …

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 …