An enhanced option pricing framework that makes use of both continuous and discontinuous time paths based on a geometric Brownian motion and Poisson-driven jump processes respectively is performed in order to better fit with real-observed stock price paths while maintaining the analytical...

We provide the first comprehensive analysis of options-implied information for predicting the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that only few option characteristics...

We provide the first comprehensive analysis of option information for pricing the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that certain option measures have significant...

In this paper we propose semi-closed-form solutions, subject to an inversion of the Fourier transform, for the price of VIX options and target volatility options (TVOs) under affine GARCH models based on Gaussian and Inverse Gaussian distributions. We illustrate the advantage of the proposed...

We synthetically create option contracts on a corporate bond index using CDX swaptions, overcoming the limitations that stem from the lack of traded corporate bond options. Our approach allows us to estimate forward-looking moments concerning the corporate bond market in a model-free manner. By...

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...

Option pricing models are calibrated to market data of plain vanillas by minimization of an error functional. From the economic viewpoint, there are several possibilities to measure the error between the market and the model. These different specifications of the error give rise to different...

We document that a theoretically founded, real-time, and easy-to-implement option-based measure, termed synthetic-stock difference (SSD), accurately estimates the part of stock's expected return arising from stock's transaction costs. We calculate SSD for U.S. optionable stocks. SSD can be more...

The stock options implied volatility skew reflects both the structural risk characteristics of the underlying company and the short-term information flow about the stock price movement. This paper builds a semi-structural cross-sectional option pricing model to separate the structural risk...

We propose a simple multidimensional jump-diffusion process for pricing exotic derivatives with multiple underlyings. This process ensures the possibility of sudden drops in asset prices, fits several well-known empirical properties of asset returns, and incorporates dependencies between...