An important component of theoretical CBOE Volatility Index (VIX) futures prices is a term correcting for the negative convexity of the square root function by subtracting from the forward-starting variance swap rate an estimate of the future volatility of VIX futures prices. In the same fashion...

With the innovation of derivatives, the Standard and Poor's (S&P) 500 index -- as an underlying asset of the volatility index (VIX) introduced by the Chicago Board Options Exchange (CBOE) -- was adopted as the research subject in this study. Since the financial crisis of 2008, the degree of...

Little is known about the economic sources that may generate the abnormal returns observed in put index options. We show that the learning process followed by investors may be one such source. We develop an equilibrium model under partial information in which a rational Bayesian learner prices...

Little is known about the economic sources that may generate the abnormal returns observed in put index options. We show that the learning process followed by investors may be one such source. We develop an equilibrium model under partial information in which a rational Bayesian learner prices...

The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most...

With the transitions to overnight benchmarks as the main benchmarks in some currencies, futures based on overnight rates are becoming more common. The most traded futures on overnight rates settle against compounded rates. The pricing of those futures requires some convexity adjustments with an...

We estimate the size of the wildcard premium embedded in cash-settled American-style options. Similar to simulation results reported by Fleming and Whaley (1994), we find the wildcard premium significantly impacts the valuations of American-style put and call options. Furthermore, we find that...

An anchoring-adjusted option pricing model is developed in which the volatility of the underlying stock return is used as a starting point that gets adjusted upwards to form expectations about call option volatility. I show that the anchoring price lies within the bounds implied by risk-averse...

Constantinides et al (2013) put forward a number of empirical findings regarding leverage adjusted S&P 500 index option returns. Their findings are puzzling in the context of the Black-Scholes-Merton Option Pricing Model and the Capital Asset Pricing Model. Experimental evidence as well as the...

We provide first-time evidence of the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are...