The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), extends to "standard dispersion" options written on the Euclidean norm of a vector of n asset performances. With the help of...

The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), is part of the more general theory of integral equations. We apply spectral decomposition techniques to show that replication may...

In the run-up to the ex-dividend day a measure based on option implied dividends predicts ex-day abnormal stock returns. These expected ex-dividend day returns increase on stocks where it is less worthwhile to capture the dividend, stocks that are less liquid, stocks with high idiosyncratic...

Volatility products have become popular in the past 15 years as a hedge against market uncertainty. In particular, there is growing interest in options on the VIX volatility index. A number of recent empirical studies examine whether there is significantly greater risk premium in VIX option...

This article explores the relationship between the SPX and VIX options markets. High-strike VIX call options are used to hedge tail risk in the SPX, which means that SPX options are a reflection of the extreme-strike asymptotics of VIX options, and vice versa. This relationship can be quantified...