Stochastic Skewness and Index Option Returns

2015 ◽  
Author(s):  
Cai Zhu
Keyword(s):  
Option Returns ◽  
Index Option

The Puzzle of Index Option Returns

CFA Digest ◽  
2014 ◽  
Vol 44 (6) ◽  
Author(s):  
Brindha Gunasingham
Keyword(s):  
Option Returns ◽  
Index Option

scholarly journals Index option returns and systemic equity risk

2018 ◽  
Vol 4 (4) ◽  
pp. 273-298
Author(s):  
Weiping Li ◽  
Tim Krehbiel
Keyword(s):  
Option Returns ◽  
Equity Risk ◽  
Index Option

scholarly journals Optimal Option Portfolio Strategies: Deepening the Puzzle of Index Option Mispricing

2017 ◽  
Vol 52 (1) ◽  
pp. 277-303 ◽  
Author(s):  
José Afonso Faias ◽  
Pedro Santa-Clara
Keyword(s):  
Asset Allocation ◽  
Risk Premia ◽  
Volatility Risk ◽  
Short Sample ◽  
Option Returns ◽  
Portfolio Strategies ◽  
Portfolio Strategy ◽  
Out Of Sample ◽  
Index Option ◽  
Mean Variance

Traditional methods of asset allocation (such as mean–variance optimization) are not adequate for option portfolios because the distribution of returns is non-normal and the short sample of option returns available makes it difficult to estimate their distribution. We propose a method to optimize a portfolio of European options, held to maturity, with a myopic objective function that overcomes these limitations. In an out-of-sample exercise incorporating realistic transaction costs, the portfolio strategy delivers a Sharpe ratio of 0.82 with positive skewness. This performance is mostly obtained by exploiting mispricing between options and not by loading on jump or volatility risk premia.

The Determinants of the KOSPI200 Index Option Returns

2016 ◽  
Vol 24 (1) ◽  
pp. 65-96
Author(s):  
Byung Jin Kang
Keyword(s):  
Cross Section ◽  
Global Financial Crisis ◽  
Factor Model ◽  
Related Factor ◽  
Related Factors ◽  
Cross Sectional ◽  
Option Returns ◽  
The Cross ◽  
The Global Financial Crisis ◽  
Index Option

This study examines the effects of crisis-related factors on the returns of KOSPI200 index options using a factor model, which was introduced by Constantinides, Jackwerth and Savov (2013). Three factors incorporating price jumps, changes in volatility, and volatility jumps are considered as the crisis-related factors. With the data for the period from 2004 to 2015, we find followings : First, most of the crisis-related factor premia are statistically significant, and their signs are consistent with those expected. Second, these crisis-related factors contribute to improve the understanding of the cross-sectional variation in KOSPI200 index option returns. Third, the crisis-related factor premia became much more significant after the global financial crisis in 2008. Finally, our empirical findings are robust to whether the long options and the in-the-money options are included in the sample or not, and to whether the factor premia are constrained to equal the corresponding premia estimated from the cross-section of equities.

A Nonlinear Factor Analysis of S&P 500 Index Option Returns

2006 ◽  
Vol 61 (5) ◽  
pp. 2325-2363 ◽  
Author(s):  
CHRISTOPHER S. JONES
Keyword(s):  
Factor Analysis ◽  
Nonlinear Factor Analysis ◽  
Option Returns ◽  
Nonlinear Factor ◽  
Index Option

Cumulative Prospect Theory, Option Returns, and the Variance Premium

2018 ◽  
Vol 32 (9) ◽  
pp. 3667-3723 ◽  
Author(s):  
Lieven Baele ◽  
Joost Driessen ◽  
Sebastian Ebert ◽  
Juan M Londono ◽  
Oliver G Spalt
Keyword(s):  
Prospect Theory ◽  
Cumulative Prospect Theory ◽  
Probability Weighting ◽  
Asset Pricing Model ◽  
Equilibrium Asset Pricing ◽  
Option Returns ◽  
Dynamic Setting ◽  
Editorial Decision ◽  
Equity Index ◽  
Index Option

Abstract We develop a tractable equilibrium asset pricing model with cumulative prospect theory (CPT) preferences. Using GMM on a sample of U.S. equity index option returns, we show that by introducing a single common probability weighting parameter for both tails of the return distribution, the CPT model can simultaneously generate the otherwise puzzlingly low returns on both out-of-the-money put and out-of-the-money call options as well as the high observed variance premium. In a dynamic setting, probability weighting and time-varying equity return volatility combine to match the observed time-series pattern of the variance premium. Received May 30, 2017; editorial decision August 10, 2018 by Editor Andrew Karolyi.

Analysis of the clientele effect and the information content of short-term index option returns in Taiwan

2018 ◽  
Vol 38 (6) ◽  
pp. 715-730
Author(s):  
Ging-Ginq Pan ◽  
Yung-Ming Shiu ◽  
Tu-Cheng Wu
Keyword(s):  
Information Content ◽  
Short Term ◽  
Option Returns ◽  
Index Option ◽  
Clientele Effect
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