We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Option-implied betas are a promising alternative to historical beta estimators, because they are inherently forward-looking and can incorporate new information immediately and fully. Recently, different implied beta estimators have been developed in previous literature, but very little is known...

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term...

Low probability events are overweighted in the pricing of out-of-the-money index puts and single stock calls. We find that this behavioral bias is strongly time-varying, linked to equity market sentiment, and higher moments of the risk-neutral density. An implied volatility (IV) sentiment...

Low probability events are overweighted in the pricing of out-of-the-money index puts and single stock calls. This behavioral bias is strongly time-varying, and is linked to equity market sentiment and higher moments of the risk-neutral density. We find that our implied volatility (IV) sentiment...

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...

The illiquidity of long-maturity options has made it difficult to study the term structures of option spanning portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses long-maturity illiquidity. By building a sieve estimator...

The change of information near light speed, advances in high-speed trading, spatial arbitrage strategies and foreseen space exploration, suggest the need to consider the effects of the theory of relativity in finance models. Time and space, under certain circumstances, are not dissociated and...

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...

We present a method for extracting the market risk premium from stock and option data and examine its validity. We extend Duan and Zhang's (2014) model to estimate the projected risk aversion coefficient using more information for the discrepancy of the physical from the risk-neutral...