In this empirical study, we demonstrate the importance of systematic risk in option prices. We do so by examining two testable hypotheses relating both the level and slope of implied volatility curves to the systematic risk of the underlying asset. Using daily option quotes on the Samp;P 100...

This paper identifies a key cause for the documented diversification discount, namely diversified firms being traded at a discount relative to focused firms. We attribute such empirical findings to different distributions of diversified firms vis-à-vis focused firms over leverage in the data...