We comprehensively analyze the predictive power of several option implied variables for monthly S & P 500 excess returns and realized variance. The correlation risk premium (CRP) emerges as a strong predictor of both excess returns and realized variance. This is true both in- and out-of-sample....

How do option and equity markets interact with each other? This is the central question that is answered from three different angles in this dissertation. The first Chapter discusses how option-implied information is incorporated into equity markets. Based on a novel rescaled option-implied...