A risk-neutral probability distribution (RND) for future S&P 500 returns extracted from index options contains investors' true expectations and also their risk preferences. But the empirical pricing kernel that emerges in a representative agent framework, which suppresses investor differences,...

Based on comprehensive regulatory data on equity mutual fund option use from the SEC's N-SAR filings, we are the first to present consistent evidence that equity funds' option use generates higher risk-adjusted performance. We further show that this is a direct effect of option use and not an...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

We examine the effects of limited investor attention on stock returns by using Google search volume index to measure investor attention. We also investigate whether national culture and market development have any role in this relationship. We find that the impact of investor attention on stock...

In this dissertation we present a new option pricing model - called the 2-Factor SV (stochastic volatility) model - which allows to account for time-varying risk aversion. Thereby, we are able to capture the empirical properties of pricing kernels, such as time-variation and the typical S-shape,...

We consider the problem of pricing options on a leveraged ETF (LETF) and the underlying ETF in a consistent manner. We show that if the underlying ETF has Heston dynamics then the LETF also has Heston dynamics so that options on both the ETF and the LETF can be priced analytically using standard...

Leveraged exchange-traded funds (LETF) are newly introduced ETFs that have become increasingly popular. It closely tracks the value of an underlying index while allowing for additional leverage. In this paper, we consider the valuation of options written on leveraged exchange-traded funds under...