Similar Search Results

Too-Systemic-To-Fail : What Option Markets Imply About Sector-Wide Government Guarantees

Kelly, Bryan T. - 2011

Investors in option markets price in a substantial collective government bailout guarantee in the financial sector, which puts a floor on the equity value of the financial sector as a whole, but not on the value of the individual firms. The guarantee makes put options on the financial sector...

Persistent link: https://www.econbiz.de/10013123683

Are Options on Index Futures Profitable for Risk Averse Investors? Empirical Evidence

Constantinides, George M. - 2014

American options on the S&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 violations...

Persistent link: https://www.econbiz.de/10013069352

Mispricing of S&P 500 Index Options

Constantinides, George M. - 2010

Widespread violations of stochastic dominance by one-month Samp;P 500 index call options over 1986-2006 imply that a trader can improve expected utility by engaging in a zero-net-cost trade net of transaction costs and bid-ask spread. Although pre-crash option prices conform to the...

Persistent link: https://www.econbiz.de/10012758035

Demand-Based Option Pricing

Garleanu, Nicolae - 2010

We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...

Persistent link: https://www.econbiz.de/10012761687

The Supply and Demand of S&P 500 Put Options

Constantinides, George M. - 2015

We document that the implied volatility skew of S&P 500 index puts is non-decreasing in the disaster index and risk …-the-money puts, thereby steepening the implied volatility skew and resolving the puzzle. Consistent with the data, the model also …

Persistent link: https://www.econbiz.de/10013022917

Mispriced Index Option Portfolios

Constantinides, George M.; Czerwonko, Michal; Perrakis, … - 2021

The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most...

Persistent link: https://www.econbiz.de/10013233758

Can Standard Preferences Explain the Prices of Out of the Money S&P 500 Put Options

Benzoni, Luca - 2009

the %u2018volatility smirk%u2019 can be rationalized if the agent is endowed with Epstein-Zin preferences and if the … framework the stark regime change in the volatility smirk that has maintained since the 1987 market crash. To this end, we … jump. Note that such beliefs only update at crash dates, and hence can explain why the volatility smirk has not diminished …

Persistent link: https://www.econbiz.de/10012767454

Parametric Inference and Dynamic State Recovery from Option Panels

Andersen, Torben G. - 2012

the spot volatility extracted from the options and the one obtained nonparametrically from high-frequency data on the … underlying asset. We further construct new formal tests of the model fit for specific regions of the volatility surface and for … index options we extend the popular double-jump stochastic volatility model to allow for time-varying jump risk premia and a …

Persistent link: https://www.econbiz.de/10013107009

Hedging Macroeconomic and Financial Uncertainty and Volatility

Dew-Becker, Ian; Giglio, Stefano; Kelly, Bryan T. - 2021

uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with …

Persistent link: https://www.econbiz.de/10013224964

Rare Disasters and Exchange Rates

Farhi, Emmanuel - 2010

values for the volatility of the exchange rate, the forward premium puzzle regression coefficients, and near-random walk …

Persistent link: https://www.econbiz.de/10012759530