We provide evidence of a strong effect of the underlying stock's illiquidity on option prices by showing that the … translates into significant excess returns of option trading strategies that are not explained by common risk factors. Simulation … chosen illiquidity measure, the measure of option expensiveness, and the return period. …

-sectional option pricing model to separate the structural risk contributions from the information flow. The model identifies two …

We compile option-implied tail loss and gain measures based on a deep out-of-the- money option pricing formula derived … by applying ‘extreme value theory', and then use these measures to investigate the information content of option …

In informationally efficient financial markets, option prices and this implied volatility should immediately be … arbitrage in zero-transaction-cost option markets, but under actual option price spreads, our results do not imply abnormal … option returns …

option portfolios. The new methodology preserves the variance swap interpretation that decomposes returns into realized … variance and option implied-variance.We apply this new methodology to explore return momentum on option portfolios across …). In contrast to stock momentum, option momentum lasts for up to five years, and does not reverse …

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a … European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract …