We study the estimation, the dynamics, and the predictability of option-implied risk-neutral moments (variance, skewness, and kurtosis) for individual stocks from various perspectives. We first show that it is in the estimation of the higher moments essential to use an interpolation with a...

This report provides an overview of the utility of single stock and custom basket options in fund management. It is shown that managers of active equity funds can limit possible negative return contributions of their over - and underweight positions via single stock options and thus help to...

This paper describes an empirical study of the information content of daily share prices and American put and call option mid-quotes about their generating process. Considering stock return and its volatility as the risk factors and without parameterizing their historical joint dynamics, two...

We find that option-implied information such as forward-looking variance, skewness and the variance risk premium are sensitive to the way the volatility surface is constructed. For some state-of-the-art volatility surfaces, the differences are economically surprisingly large and lead to...

The objective of this paper is to perform a joint analysis of jump activity for commodities and their respective volatility indices. Exploiting the property that for affine jump-diffusion models a volatility index, which is quoted on the market, is an affine function of the instantaneous...

This paper explores the contagious propagation of jumps among international stock market indices by exploiting a rich panel of stock and options data. We propose a multivariate option pricing model designed to allow for, but not superimpose, time and space amplification of jumps in option...

This research focuses on the estimation of measures of rare disaster concerns from option prices. We propose a new smile construction approach to obtain the required continuum of implied volatilities from discretely sampled observations that are affected by microstructure noise. We extrapolate...

In this work, we suggest a novel quadratic programming-based algorithm to generate an arbitrage-free call option surface. Our approach relies on a regression spline-based implementation of the framework proposed by Orosi (2011) who presents a multi-parameter extension of the models of Figlewski...

We provide evidence of a strong effect of the underlying stock's illiquidity on option prices by showing that the average absolute difference between historical and implied volatility increases with stock illiquidity. This pattern translates into significant excess returns of option trading...

U.S. exchange-traded stock options are exercisable before expiration. While put options should frequently be exercised early to earn interest, they are not. In this paper, we derive an early exercise decision rule and then examine actual exercise behavior during the period January 1996 through...