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Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013

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...

Persistent link: https://www.econbiz.de/10010226098

The term structure of systematic and idiosyncratic risk

Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017

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...

Persistent link: https://www.econbiz.de/10011751173

Improving Portfolio Selection Using Option-Implied Volatility and Skewness

DeMiguel, Victor - 2012

. Using option-implied correlation does not improve any of the metrics. Using option-implied volatility, risk-premium, and …

Persistent link: https://www.econbiz.de/10013116788

Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns?

Bali, Turan G. - 2012

We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the price of the underlying stock...

Persistent link: https://www.econbiz.de/10013111682

Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns?

Bali, Turan G. - 2013

Persistent link: https://www.econbiz.de/10013094978

Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set

Sala, Carlo; Barone-Adesi, Giovanni - 2015

Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

Persistent link: https://www.econbiz.de/10011506352

Predicting the equity market with option implied variables

Prokopczuk, Marcel; Tharann, Björn; Wese Simen, Chardin - 2017

returns and realized variance. The correlation risk premium (CRP) emerges as a strong predictor of both excess returns and …

Persistent link: https://www.econbiz.de/10011751188

Stock Return Extrapolation, Option Prices, and Variance Risk Premium

Atmaz, Adem - 2020

This paper presents a tractable dynamic equilibrium model of stock return extrapolation in the presence of stochastic volatility. In the model, consistent with survey evidence, following positive (negative) stock returns, investors expect future returns to be higher (lower) but also less (more)...

Persistent link: https://www.econbiz.de/10012850367

A Lattice Method for Option Evaluation with Regime-Switching Asset Correlation Structure

Christoforidou, Amalia - 2015

This paper develops a lattice method for option evaluation in the presence of regime shifts in the correlation … whether option prices reflect switches in the correlation between the underlying asset of an option and the risk-free bond … while in the second model, in order to isolate the regime-switching correlation effect on the option prices, we allow only …

Persistent link: https://www.econbiz.de/10013021556

Portfolio Optimization for VAR, CVaR, Omega and Utility with General Return Distributions : A Monte Carlo Approach for Long-Only and Bounded Short Portfolios with Optional Robustness and a Simplified Approach to Covariance Matching

Shaw, William Thornton - 2011

We develop the idea of using Monte Carlo sampling of random portfolios to solve portfolio investment problems. We explore the need for more general optimization tools, and consider the means by which constrained random portfolios may be generated. DeVroye's approach to sampling the interior of a...

Persistent link: https://www.econbiz.de/10013124340