American options on the Samp;P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) from 1983 to 2006 are identified as potentially profitable trades. Call bid prices more frequently violate their upper bound than put bid prices do, while...

When an investor delegates portfolio management to a hedge fund manager, whose risk-taking preference governs? Single-period models with option-like incentives suggest stark variation in risk-taking across fund value and time as fund managers maximize their own well-being. Empirical validation...

This practical guide is for the PhD student in empirical financial economics. Tips range from finding and developing a research idea to collecting data to choosing programming languages and methods to writing a paper to presenting and publishing it

One of the central questions in financial economics is the determination of asset prices, such as the value of a stock. Over the past three decades, research on this topic has converged on a concept called the quot;state-price densityquot;. However, a puzzle has arisen. On the one hand, Cox,...

Rubinstein (1994) shows evidence of a significant time pattern in the shape of the volatility smile after the crash of 1987 and proposes an implied binomial tree approach to overcome the empirical limitations of the Black and Scholes model. This approach, and more generally the class of...

A relationship exists between aggregate risk-neutral and subjective probability distributions and risk aversion functions. We empirically derive risk aversion functions implied by option prices and realized returns on the Samp;P 500 index simultaneously. These risk aversion functions...

American options on the Samp;P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) from 1983 to 2006 are identified as potentially profitable trades. Call bid prices more frequently violate their upper bound than put bid prices do, while...

We document widespread violations of stochastic dominance by one-month Samp;P 500 index call options market over 1986-2006. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect by...