This paper is the first to study the hedging of price risk with uncertain payment dates, a frequent problem in practice … advantages with increasing hedge horizons and strongly dependent time and price risk, while linear instruments can suffice for …

-varying volatility for stock returns, even when volatility of economic fundamental is constant. As a source of risk, for investors with … intuition, we show that information uncertainty as a systematic risk factor is able to explain variance premium term structure … and has better performance to explain cross-section index option returns than traditional symmetric risk factors such as …

We extend the Rothschild and Stiglitz (1970, 1971) notion of increasing risk to families of random variables and in …

volatilities can also be constructed specific to, and different across, option contracts. Applying the new theory to the S&P 500 … index time series and options data, we extract volatility risk and risk premium from the volatility surfaces, and find that … the extracted risk premium significantly predicts future stock returns …

We document that the skew of S&P500 index puts is non-decreasing in the disaster index and risk-neutral variance …, contrary to the implications of no-arbitrage models. Our model resolves the puzzle by recognizing that, as the disaster risk …

In this paper, we propose a cross-sectional option momentum strategy that is based on the risk component of delta …-hedged option returns. We find strong evidence of risk continuation in option returns. Specifically, options with a high risk … component significantly outperform those with a low risk component. The risk-based option momentum strategy is highly profitable …

/bear contracts (CBBCs). These contracts have high skewness when close to callback and thus appeal to cumulative prospect theory …