We propose a criterion for portfolio selection, implied excess Sharpe ratio. The implied excess Sharpe ratio is intended as an excess Sharpe ratio (versus the underlying stock) that investors can expect to enjoy from portfolios that include options and is a useful ex ante indicator that can be...

In this article we analyze the risk associated with hedging written call options. We introduce a way to isolate the gamma risk from other risk types and present its loss distribution, which has heavy tails. Moving to an insurance point of view, we define a loss ratio that we find to be well...