In the aftermath of the credit and banking crises, VIX-based ETNs have gained in popularity among under-diversified market participants since traditional diversification channels became less effective due to increasing correlations. Since then, VIX investing has attracted much heated debate...

This paper examines the incentives from stock options for loss-averse employees subject to probability weighting. Employing the certainty equivalence principle, I built on insights from Cumulative Prospect Theory (CPT) to derive a continuous time model to value options from the perspective of a...

This paper examines the incentives from stock options for loss-averse employees subject to probability weighting. Employing the certainty equivalence principle, I built on insights from Cumulative Prospect Theory (CPT) to derive a continuous time model to value options from the perspective of a...

It is well documented in the empirical literature that employee stock options exercise behavior is driven by economic/rational factors as well as by psychological/behavioral factors. The latter include a set of behavioral biases affecting attitudes towards risk. Perhaps the most comprehensive...

This paper addresses the well-documented tracking error (TE) symmetry issue that undermines traditional benchmark-driven equity portfolio allocation processes. We first demonstrate how a base-case TE-driven strategy could be merely adjusted in order to work out the TE symmetry problem. The...