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Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Persistent link: https://www.econbiz.de/10010226098

A jumping index of jumping stocks? : an MCMC analysis of continuous-time models for individual stocks

Pollastri, Alessandro; Rodrigues, Paulo Jorge Maurício; … - 2022 - This version: December 6, 2022

This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it...

Persistent link: https://www.econbiz.de/10013465942

Stock Return Autocorrelations and Expected Option Returns

Jeon, Yoontae - 2020

We present a new finding that the return autocorrelation of underlying stock is an important determinant of expected equity option returns. Using an extended Black-Scholes model incorporating the presence of stock return autocorrelation, we show that expected returns of both call and put options...

Persistent link: https://www.econbiz.de/10012849686

Volatility and Expected Option Returns : A Note

Chaudhury, Mo - 2017

nature of the answer when the volatility differential is due to the systematic/priced risk. Here the difference in the … direction and magnitude of the net effect depends on the levels of asset beta and volatility and the moneyness and maturity of … nonlinear derivatives, one should pay attention to the source of volatility differential, and the sample range/mix of betas …

Persistent link: https://www.econbiz.de/10012968263

Volatility and Expected Option Returns

Hu, Guanglian - 2017

We analyze the relation between expected option returns and the volatility of the underlying securities. The expected … return from holding a call (put) option is a decreasing (increasing) function of the volatility of the underlying. These … portfolios decrease (increase) with underlying stock volatility. This finding is not due to cross-sectional variation in expected …

Persistent link: https://www.econbiz.de/10012970574

The Shape of the Pricing Kernel and Expected Option Returns

Schlag, Christian; Sichert, Tobias - 2021

the pricing kernel has strong implications for the impact of volatility on expected options returns. For example, we show … both theoretically and empirically that higher volatility can increase or decrease expected call option returns, depending …

Persistent link: https://www.econbiz.de/10013239311

Estimating the Market's Expected Return and Uncertainty from Option Prices

Jaisinghani, Nikhil - 2023

This paper proposes an option pricing model which can estimate the market’s expected return and the market’s uncertainty of this return while complying with various complex characteristics of real world markets. First, it is proposed that the market is not homogenous; the market is made up...

Persistent link: https://www.econbiz.de/10014254400

Estimating the Market's Expected Return and Uncertainty from Option Prices

Jaisinghani, Nikhil - 2023

This paper proposes an option pricing model which can estimate the market’s expected return and the market’s uncertainty of this return while complying with various complex characteristics of real-world markets. First, it is proposed that the market is not homogenous; the market is made up...

Persistent link: https://www.econbiz.de/10014350096

Predictable Stock Returns, Transaction Costs, and the (Un)Informativeness of Option Prices

Goncalves-Pinto, Luis - 2020

We show that option prices predict future stock returns only when stock returns are ex-ante predictable using public signals from the stock market itself. Directional option trading cannot explain these results, suggesting that they are not driven by informed trading or superior ability of...

Persistent link: https://www.econbiz.de/10012855271

Does Risk-Neutral Skewness Predict the Cross-Section of Equity Option Portfolio Returns?

Bali, Turan G. - 2012

exposure to changes in the price of the underlying stock (delta), and exposure to changes in implied volatility (vega) are …-known market, size, book-to-market, momentum, and short-term reversal factors. Additional volatility, stock, and option market …

Persistent link: https://www.econbiz.de/10013111682