This paper attempts to distinguish hedging versus speculative derivative usage by U.S. bank holding companies, and whether that has implications for future performance. This is accomplished by implementing a multi-step procedure that relates the implied volatility from traded options on these...

This paper examines the historical performance of 12 portfolios that include Samp;P 100/500 index options. Each option portfolio is formed using options with different maturities and moneyness, while incorporating bid-ask spreads, transaction costs, and margin requirements. Raw and risk-adjusted...

Executive stock options (ESOs) have been extensively examined. An unexplored but highly relevant issue is how the options are valued and what information this valuation provides to the market. Understanding ESOs valuation is difficult because there is no set method. Using a model such as...

If publishing an anomaly leads to the dissipation of its profitability, a notion that has mounting empirical support, then publishing a highly profitable market anomaly seems to be irrational behavior. This paper explores the issue by developing and empirically testing a theory that argues that...

Using three natural experiments, we test the hypothesis that investor overconfidence produces overpricing of high idiosyncratic volatility stocks in the presence of binding short-sale constraints. We study three events: IPO lockup expirations, option introductions, and the 2008 short-sale ban on...

In this paper I attempt to estimate the risk premiums in energy markets using the closing prices from futures and options contracts of natural gas. Solving for the instantaneous parameters is conducted over several parametric models where the results suggest a model that incorporates both return...

I investigate whether the volatility risk premium is negative in energy and equity markets by examining the statistical properties of delta-gamma hedged option portfolios (selling the option, hedging with the underlying contract, and correcting for tracking error with an additional option). By...

This paper examines the benefits and costs of investing in firm specific options as an additional investment in a portfolio. We examine twelve option strategies and find that there is significant negative (positive) abnormal return to buying (selling) puts from January 1996 through July 2006....

Current literature is inconclusive as to whether idiosyncratic risk influences future stock returns and the direction of the impact. Prior studies are based on historical realized volatility. Implied volatilities from option prices represent the market's assessment of future risk and are likely...

In this paper we examine the extent of the bias between Black-Scholes (1973)/Black (1976) implied volatility and realized term volatility in the equity and energy markets. Explicitly modeling a market price of volatility risk, we extend previous work by demonstrating that Black-Scholes is an...