We develop a novel method to decompose a straddle into a volatility risk portfolio and a jump risk portfolio. The method utilizes the factor-mimicking portfolios in Cremers et al. (2015) to replicate the straddles that are originally used to construct these factor-mimicking portfolios. Based on...

In this article we explore the relationship between 19 of the most common anomalies reported for the US market and the cross-section of Mexican stock returns. We find that 1-month stock returns in Mexico are robustly predicted only by 3 of the 19 anomalies: momentum, idiosyncratic volatility,...

This paper studies the factor structure of the cross-section of delta-hedged equity option returns. We find that a four-factor model explains the cross-section and time-series of equity option returns. Out of the four factors, three are characteristic based factors from the long-short option...

This paper studies the effects of default risk on equity option returns. We show that there is a cross-sectional and a time-series relation between default risk and option returns. In the cross-section, expected delta-hedged equity option returns have a negative relation with default risk...

This paper studies the relation between the uncertainty of volatility, measured as the volatility of volatility, and future delta-hedged equity option returns. We find that delta-hedged option returns consistently decrease in uncertainty of volatility. Our results hold for different measures of...