This paper studies the effect of option trading on corporate investment and financing policies. Based on prior … literature, I hypothesize that option market induces informed trading and thus reduces information asymmetry and the cost of … capital. As a result, firms with high option trading have more investment and financing. Specifically, based on the United …

investors needed better ways to protect their portfolios through option insurance. These tools provide greater flexibility to …-normality assumption of the Black-Scholes option pricing model led to the discovery of the volatility smile, smirk, or skew in options … markets. These stylized facts; that is, the volatility smile and implied volatilities implied by the option prices, are well …

The thesis studies index and equity option returns in perfect and imperfect markets to explain parts of the option … shows that an option-implied risk-adjusted approach and the standard Black-Scholes model are consistent with empirical mean … frictions which allow arbitrage-free deviations of option prices from fair value resulting in option retur... …

In this paper, we modify Duan’s (1995) local risk-neutral valuation relationship (mLRNVR) for the GARCH option … premium. Empirical estimation exercises show that the GARCH option-pricing models under our mLRNVR are able to price the SPX …