Past empirical work has shown that implied volatility, while forward looking, bears little useful information about future returns for assets. We take a closer look at the mathematical nature of implied volatility in order to show, at least in theory, that implied volatility must carry an...

Continuous time models have been elevated to great importance in the modelling of time series data, in response to the successful options pricing model of Black and Scholes (1973), among other things. In 2004, Kluppelberg, Lindner, and Maller introduced the “COGARCH” model as a...

This paper derives accurate inferences about the contribution of a high-dimensional set of option and stock characteristics to the cross-sectional variation in delta-hedged option returns. Unlike the extant literature that is largely focused on the construction of predictive models, we apply...