Showing 1 - 10 of 5,120
We study the estimation, the dynamics, and the predictability of option-implied risk-neutral moments (variance, skewness, and kurtosis) for individual stocks from various perspectives. We first show that it is in the estimation of the higher moments essential to use an interpolation with a...
Persistent link: https://www.econbiz.de/10013150961
The role of market jump risk premium implicit in individual equity options has not been examined to date. This paper develops a new factor model for equity returns and option pricing that takes into account the market's diffusive and jump risks. We estimate the model on a large cross section of...
Persistent link: https://www.econbiz.de/10013152217
We employ a refined tree method to value employee stock options (ESOs) in the stochastic volatility model of Heston. Our setting covers risk-averse employees maximizing expected utility where we in particular focus on subjective option valuation, personal market beliefs and stochastic...
Persistent link: https://www.econbiz.de/10013088792
We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the price of the underlying stock...
Persistent link: https://www.econbiz.de/10013111682
We examine whether the option market leads the stock market with respect to positive in addition to negative price discovery. We document that out-of-themoney (OTM) option prices, which determine the Risk-Neutral Skewness (RNS) of the underlying stock return's distribution, can embed positive...
Persistent link: https://www.econbiz.de/10011872403
Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P500 index option...
Persistent link: https://www.econbiz.de/10013007655
We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the underlying stock price...
Persistent link: https://www.econbiz.de/10013094978
The implied volatilities provided by OptionMetrics in the IvyDB database suggest substantial deviations from put-call parity that do not really exist. In S&P 500 options, artificial deviations occur because OptionMetrics uses non-synchronous index and option prices and an average implied...
Persistent link: https://www.econbiz.de/10013296293
We study the relation between a comprehensive set of firm characteristics and the entire universe of individual equity option prices. We find that 42 out of 86 characteristics are priced in the option market, in the sense that they significantly explain differences in the implied volatility...
Persistent link: https://www.econbiz.de/10014254814
This paper presents direct evidence that option price quotes do not contain any information about future stock prices beyond what is already reflected in current stock prices. We use trade and quote data for 39 liquid U.S. stocks and ETFs and options on them, and focus on events when the two...
Persistent link: https://www.econbiz.de/10013115657