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...

Insurers in the U.S. hold over $5 trillion in assets, with approximately $1 trillion of these assets held in equities. While insurers manage underwriting risk with reinsurance, insurers increasingly manage asset risk with options, futures, and other derivatives. We demonstrate, using all options...

Exchange traded funds (ETFs) mirror an existing index by holding the same component stocks and matching the weighting scheme. ETFs offer services and investment flexibility that indexed mutual funds generally do not. We expect that if ETFs offer additional benefits over index funds, such as...

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...

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....

Theoretical expectations related to market discipline generally suggest a positive relationship between firm financial strength and price. We examine market discipline in the individual annuity market by measuring annuity contract yields during the accumulation phase and find that, among other...

Prior studies find that the CBOE Volatility Index (VIX) predicts returns on broad stock market indices. This is an important finding because it suggests implied volatilities measured by VIX are a risk factor affecting security returns or an indicator of market inefficiency. We extend prior work...

Since the 1987 crash, option prices have exhibited a strong negative skew, implying higher implied volatility for out-of-the-money puts than at- and in-the-money puts. This has resulted in incorporating multiple jumps and stochastic volatility within the data generating process to improve the...

This paper presents a parsimonious, implementable model for the estimation of the short- and long-term expected rates of return on the Samp;P 500 stock market Index. The model estimates a parametric form for the Market Price of Risk, the Sharpe Ratio, of the Samp;P 500 Index. In addition to...