The skewed generalized t (SGT) displays an exceptional ability in modelling the tails of the empirical distributions of returns of financial and other assets. This feature makes it an appealing candidate for the computation of value at risk and expected shortfall measures, used by regulators,...

This article provides a mathematical and empirical investigation of the reasons for the presence of skewness and kurtosis in financial data. The results indicate that this phenomenon is triggered by higher-order moment dependencies in the data, such as asymmetric and conditional volatility....

This is the first study on the risk-neutral distribution of option returns. We derive solutions for the risk-neutral variance, skewness, and kurtosis of call and put option returns and document several properties of these ex-ante moments. We find that the volatility, skewness, and kurtosis of...

Motivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to...

We develop an ex-ante measure of expected stock returns based on analyst price targets. We then show that ex-ante measures of volatility, skewness, and kurtosis implied from stock option prices are positively related to the cross section of ex-ante expected stock returns. While expected returns...

We investigate the cross-sectional return predictability of delta-hedged equity options using machine learning and big data. Drawing upon more than 12 million observations over the period from 1996 to 2020, we find that allowing for nonlinearities significantly increases the out-of-sample...

We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the price of the underlying stock...