The equilibrium magnitude of mispricing can be no greater than the cost of arbitraging it away. Yet, mispricing typically arises when the uncertainty about a firm is high, which is precisely when the stock's liquidity is low. This is the case for stocks with high analyst disagreement about...

This book surveys and summarizes the numerous approaches used to extract information on market expectations from option prices. The various approaches are thoroughly explained and many practical issues are discussed, including: data selection, data preparation, and presentation and...