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Working Paper
Being Right is Not Enough: Buying Options to Bet on Higher Realized Volatility
September 27, 2018
Should investors who buy options expect to profit when realized volatility increases? If so, under what conditions? To answer these questions, we analyzed the relationship between long volatility performance (buying options) and contemporaneous changes in volatility.
Journal Article
An Alternative Option to Portfolio Rebalancing
March 5, 2018
We explore how investors can use an implementable option selling overlay to improve portfolio rebalancing.
Interview
Words From the Wise: An AQR Interview with Ed Thorp
January 10, 2018
We sat down with Ed Thorp, a pioneer in the mathematical analysis of casino games and investing, to get his insights on an array of topics from casino gambling to quantitative investing.
Perspective
Please Stop Talking About the VIX So Much
July 30, 2017
It has become quite commonplace to note that the VIX (the CBOE Volatility Index) is currently very low and to worry about it. But Cliff tends to think there's less to worry about than most.
Working Paper
Which Index Options Should You Sell?
July 7, 2017
We study return and risk properties of equity-hedged options across the S&P 500 option surface. We evaluate returns by estimating alpha to the S&P 500 and quantify risk using return volatility, losses under stress tests, and conditional value at risk.
Journal Article
Pathetic Protection: The Elusive Benefits of Protective Puts
February 24, 2017
Conventional wisdom is that put options are effective drawdown protection tools.
Working Paper
Early Option Exercise: Never Say Never
March 18, 2016
A classic rule in financial economics: Never exercise a call option and never convert a convertible bond, except just before expiration or dividend payments. This paper shows how this rule breaks down when financial frictions are introduced.
Working Paper
Generalized Recovery
March 1, 2016
We shed new light, both theoretically and empirically, on the Holy Grail in financial economics: decoding probabilities and risk preferences from asset prices.
Working Paper
Credit Implied Volatility
March 10, 2015
This paper introduces the concept of a credit implied volatility surface. The credit implied volatility (CIV) can be interpretable as risk-neutral asset volatility of the underlying firm—the slope of the CIV term structure is negative in downturns and positive during expansions.
Working Paper
Cash-Flow Maturity and Risk Premia in CDS Markets
November 12, 2014
We study the risk adjusted returns of credit default swaps of different maturities to learn more about the impact of higher sensitivities to credit fundamentals.