The cross-section of stock returns has substantial exposure to risk captured by higher moments in market returns. We estimate these moments from daily S&P 500 index option data. The resulting time series of factors are thus genuinely conditional and forward-looking. Stocks with high...

We measure uncertainty surrounding the central bank's future policy rates using implied volatility computed from interest rate option prices and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following the most...

Equity risk measured by beta is of great interest to both academics and practitioners. Existing estimates of beta use historical returns. Many studies have found option-implied volatility to be a strong predictor of future realized volatility. We find that option-implied volatility and skewness...

In this paper, we propose a novel parametric approach to extract the implied risk-neutral density function from a cross-section of call option prices. The method is based on the framework proposed by Orosi (2011), who presents a multi-parameter extension of the models of Figlewski (2002) and...

Risk neutral densities recovered from option prices can be used to infer market participants’ expectations of future stock returns and are a vital tool for pricing illiquid exotic options. Although there is a broad literature on the subject, most studies do not address the likelihood of...