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Mispricing of S&P 500 Index Options
Constantinides, George M. - 2010
Widespread violations of stochastic dominance by one-month Samp;P 500 index call options over 1986-2006 imply that a trader can improve expected utility by engaging in a zero-net-cost trade net of transaction costs and bid-ask spread. Although pre-crash option prices conform to the...
Persistent link: https://www.econbiz.de/10012758035
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Mispriced Index Option Portfolios
Constantinides, George M.; Czerwonko, Michal; Perrakis, … - 2021
The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most...
Persistent link: https://www.econbiz.de/10013233758
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Index-Option Pricing with Stochastic Volatility and the Value of Accurate Variance Forecasts
Engle, Robert F. - 2010
In pricing primary-market options and in making secondary markets, financial intermediaries depend on the quality of forecasts of the variance of the underlying assets. Hence, the gain from improved pricing of options would be a measure of the value of a forecast of underlying asset returns....
Persistent link: https://www.econbiz.de/10012763182
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A Multiple Indicators Model for Volatility Using Intra-Daily Data
Gallo, Giampiero M.; Engle, Robert F. - 2021
Many ways exist to measure and model financial asset volatility. In principle, as the frequency of the data increases …, the quality of forecasts should improve. Yet, there is no consensus about a true' or best' measure of volatility. In this … paper we propose to jointly consider absolute daily returns, daily high-low range and daily realized volatility to develop a …
Persistent link: https://www.econbiz.de/10013246085
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Hedging Macroeconomic and Financial Uncertainty and Volatility
Dew-Becker, Ian; Giglio, Stefano; Kelly, Bryan T. - 2021
uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with …
Persistent link: https://www.econbiz.de/10013224964
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Trends in the Transitory Variance of Male Earnings in the U.S., 1970-2004
Moffitt, Robert A. - 2011
We estimate the trend in the transitory variance of male earnings in the U.S. using the Michigan Panel Study of Income Dynamics from 1970 to 2004. Using both an error components model as well as simpler but only approximate methods, we find that the transitory variance started to increase in the...
Persistent link: https://www.econbiz.de/10013129122
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What Caused the Decline in U.S. Business Cycle Volatility?
Gordon, Robert J. - 2021
This paper investigates the sources of the widely noticed reduction in the volatility of American business cycles since … the mid 1980s. Our analysis of reduced volatility emphasizes the sharp decline in the standard deviation of changes in … of reduced business-cycle volatility. Supply shocks accounted for 80 percent of the volatility of inflation before 1984 …
Persistent link: https://www.econbiz.de/10013213454
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Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S&P 500 Options
Santa-Clara, Pedro - 2005
We use a novel pricing model to filter times series of diffusive volatility and jump intensity from Samp;P 500 index … about twice the premium required to compensate the same investor for the realized volatility, 5.8 percent. Moreover, the ex …
Persistent link: https://www.econbiz.de/10012785090
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The VIX, the Variance Premium and Stock Market Volatility
Bekaert, Geert - 2013
tackle several measurement issues assessing a plethora of state-of-the-art volatility forecasting models. We then examine the …
Persistent link: https://www.econbiz.de/10013082768
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Dividend Dynamics, Learning, and Expected Stock Index Returns
Jagannathan, Ravi - 2015
We present a latent variable model of dividends that predicts, out-of-sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long-run risks model, the model predicts, out-of-sample,...
Persistent link: https://www.econbiz.de/10013015544