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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
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Cross-section without factors : correlation risk, strings and asset prices
Distaso, Walter; Mele, Antonio; Vilkov, Grigory - 2021 - This version: January 13, 2021
quantities driven by common factors, which hinders achieving a neat definition of a correlation premium. We formulate a model … returns: an average correlation premium. This premium is both statistically and economically significant, and considerably …-series behavior of the premium for the risk of changes in asset correlations (the premium for correlation risk), including its inverse …
Persistent link: https://www.econbiz.de/10012421289
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Option-implied term structures
Vogt, Erik - 2014
portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses … nonparametric. New confidence intervals quantify the term structure estimation error. The framework is applied to estimating the …
Persistent link: https://www.econbiz.de/10010459730
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Getting Real Forecasts, State Price Densities and Risk Premium from Euribor Options
Ivanova, Vesela - 2013
In this paper we study the development of interest rate risk premium and option implied state price densities in the Euribor futures option market. Using parametric and non-parametric statistical calibration, we transform the risk-neutral option implied densities for the Euribor futures rate...
Persistent link: https://www.econbiz.de/10013089617
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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
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Option-Implied Correlations, Factor Models, and Market Risk
Buss, Adrian - 2017
Implied correlation and variance risk premium stand out in predicting market returns. However, while the predictive … ability of implied correlation lasts for up to a year, the variance risk premium predicts market returns only for one quarter … ahead. Contrary to the accepted view, implied correlation predicts the market return not through a diversification risk …
Persistent link: https://www.econbiz.de/10012964588
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Out-of-Sample Equity Premium Prediction : The Role of Option-Implied Constraints
Wang, Yunqi; Zhou, Ti - 2022
We study a new constrained equity premium forecasting approach which employs the option-implied lower bounds for the conditional market premium from Martin (2017) and Chabi-Yo and Loudis (2020), respectively, as forecast constraints. This constrained approach delivers considerable out-of-sample...
Persistent link: https://www.econbiz.de/10014235754
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Conditional Leverage and the Term Structure of Option-Implied Equity Risk Premia
Chabi-Yo, Fousseni; Langlois, Hugues - 2022
In a one-period economy, Martin (2017) and Chabi-Yo and Loudis (2020) derive bounds for the equity risk premium that use options of the same maturity as the horizon at which the premium is measured. In contrast, we provide an expression and an empirical methodology to measure the premium at a...
Persistent link: https://www.econbiz.de/10013405695
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Predicting Equity Risk Premium Using the Smooth Cross-Sectional Tail Risk : The Importance of Correlation
Faias, José Afonso - 2018
We provide a new monthly cross-sectional measure of stock market tail risk, defined as the average of the daily cross-sectional tail risk, rather than the tail risk of the pooled daily returns within a month. The former better captures monthly tail risk rather than merely the tail risk on...
Persistent link: https://www.econbiz.de/10012936981
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Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set
Sala, Carlo; Barone-Adesi, Giovanni - 2015
information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental …
Persistent link: https://www.econbiz.de/10011506352