This paper examines the empirical literature on individual equity options, discussing results in areas of consensus, showing findings in areas of disagreement and providing a guide for future research (especially highlighting analyses that cannot be performed with index options). Key topics...

We find that option expensiveness, as measured by delta-hedged option returns, is higher for low-ESG stocks, indicating that investors pay a premium in the option market to hedge ESG-related uncertainty. We estimate this ESG premium to be about 0.3% per month. All three components of ESG...

This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts and find two methods that yield accurate...

This paper improves continuous-time variance swap approximation formulas to derive exact returns on benchmark VIX option portfolios. The new methodology preserves the variance swap interpretation that decomposes returns into realized variance and option implied-variance.We apply this new...

Analyzing over 15 years of account-level trading records from Finland, we show that option features-expiration, moneyness, and the strike price-influence the behavior of retail investors and exacerbate their behavioral biases. Retail investors selectively exploit the expiration feature of...

We address the joint hypothesis problem in cross-sectional asset pricing by using measured analyst expectations of earnings growth. We construct a firm-level measure of Expectations Based Returns (EBRs) that uses analyst forecast errors and revisions and shuts down any cross-sectional...

We develop a novel approach for the direct extraction of aggregated investor attention and relative risk aversion (RRA) from European option prices. Applying it to China 50ETF options data, we document several noteworthy findings. First, we introduce the option-implied attention (OIA) index,...