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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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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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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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On the Relative Pricing of Long Maturity S&P 500 Index Options and Cdx Tranches
Collin-Dufresne, Pierre - 2010
We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 options and tranche spreads on the five-year CDX index. We demonstrate the importance of calibrating the model to match the entire term structure of CDX index spreads because it...
Persistent link: https://www.econbiz.de/10013148002
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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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Too-Systemic-To-Fail : What Option Markets Imply About Sector-Wide Government Guarantees
Kelly, Bryan T. - 2011
Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector...
Persistent link: https://www.econbiz.de/10013123683
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Demand-Based Option Pricing
Garleanu, Nicolae - 2010
We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand 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...
Persistent link: https://www.econbiz.de/10012761687
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The Supply and Demand of S&P 500 Put Options
Constantinides, George M. - 2015
We document that the implied volatility skew of S&P 500 index puts is non-decreasing in the disaster index and risk …-the-money puts, thereby steepening the implied volatility skew and resolving the puzzle. Consistent with the data, the model also …
Persistent link: https://www.econbiz.de/10013022917
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Parametric Inference and Dynamic State Recovery from Option Panels
Andersen, Torben G. - 2012
the spot volatility extracted from the options and the one obtained nonparametrically from high-frequency data on the … underlying asset. We further construct new formal tests of the model fit for specific regions of the volatility surface and for … index options we extend the popular double-jump stochastic volatility model to allow for time-varying jump risk premia and a …
Persistent link: https://www.econbiz.de/10013107009