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...

There is a set of corporate situations, when there is an exchange of one asset for another, for example, the offer on an exchange of corporate securities. Special case of such offer is the exchange the preferred share which are available for the company on ordinary share. Application of models...

We develop a real options model in which a firm exposed to seasonal variations in its output price is able to produce output, store it, and sell it later, separating the production and selling decisions. The model suggests that the optimal policy for a firm with low inventory costs is to spread...

This paper compares two approaches to options: (1) Risk-Aware Approach, and (2) Risk-Neutral Approach. The risk-aware approach requires a probabilistic specification of the underlying’s returns, addressing higher than second moments, as hedging errors are singularly dependent on the excess...

Our results suggest, selling SPY strangles are generally profitable across a variety of widths. However, the payoff profile of a short option strangle exposes the contract seller to a potential for unlimited losses. Our evidence on maximum draw-downs indicates that losses on some positions can...

Stocks with high net gamma exposure robustly underperform stocks with low net gamma exposure by 10% per year. This effect is distinct from multiple previously documented return predictors, and survives many robustness checks. We show that stocks with low net gamma exposure negatively predicts...

A news-based model (NBM) in which stock prices are determined by three types of news is proposed. The first type is non-diversifiable macroeconomic and geopolitical news. Their impact on prices is accounted using the total market return in the spirit of the CAPM. The second type is the equity...

We provide the first comprehensive analysis of options-implied information for predicting the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that only few option characteristics...

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...

Option-implied betas are a promising alternative to historical beta estimators, because they are inherently forward-looking and can incorporate new information immediately and fully. Recently, different implied beta estimators have been developed in previous literature, but very little is known...