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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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The price of the smile and variance risk premia
Gruber, Peter H.; Tebaldi, Claudio; Trojani, Fabio - 2015 - This version: September 8, 2015
In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...
Persistent link: https://www.econbiz.de/10011412294
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A Jump and Smile Ride : Jump and Variance Risk Premia in Option Pricing
Alitab, Dario - 2019
We introduce a discrete-time model for log-return dynamics with observable volatility and jumps. Our proposal extends the class of Realized Volatility heterogeneous auto-regressive gamma (HARG) processes adding a jump component with time-varying intensity. The model is able to reproduce the...
Persistent link: https://www.econbiz.de/10012904165
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Option-Implied Information and Predictability of Extreme Returns
Vilkov, Grigory - 2012
We study whether option-implied conditional expectation of market loss due to tail events, or tail loss measure, contains information about future returns, especially the negative ones. Our tail loss measure predicts future market returns, magnitude, and probability of the market crashes, beyond...
Persistent link: https://www.econbiz.de/10013100653
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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
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Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns?
Bali, Turan G. - 2013
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 underlying stock price...
Persistent link: https://www.econbiz.de/10013094978
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Asymmetric Covariance, Volatility, and Time-Varying Risk Premium : Evidence from the Finnish Stock Market
Islam, Sultan - 2023
It turns out that stock return volatility responds asymmetrically following negative stock returns. A negative return shock causes next-period volatility to increase more than that of a positive return shock. The article examines the asymmetric property of return volatility using the volatility...
Persistent link: https://www.econbiz.de/10014355234
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Generalized Bounds on the Conditional Expected Excess Return on Individual Stocks
Chabi-Yo, Fousseni - 2020
We derive generalized bounds on conditional expected excess returns. The bounds deliver consistent expected returns for individual and index-type assets, are conditionally tight, account for all risk-neutral moments of returns, and outperform runner-up models for out-of-sample predictions....
Persistent link: https://www.econbiz.de/10012838211
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Tail Risk and Asset Prices
Kelly, Bryan T. - 2014
We propose a new measure of time-varying tail risk that is directly estimable from the cross section of returns. We exploit firm-level price crashes every month to identify common fluctuations in tail risk across stocks. Our tail measure is significantly correlated with tail risk measures...
Persistent link: https://www.econbiz.de/10013063059