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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.
Journal Article
Pathetic Protection: The Elusive Benefits of Protective Puts
February 24, 2017
Conventional wisdom is that put options are effective drawdown protection tools.
Trade Publication
Ahead of the Curve: Time to Embrace Downside Risk
February 15, 2016
Buying equity put options to reduce a portfolio’s downside risk exposure is so attractive that the high cost of doing so all but offsets the benefit, the authors contend.
White Paper
Understanding the Volatility Risk Premium
May 11, 2018
The volatility risk premium (VRP) represents the compensation that investors earn for providing protection against market losses. We explain the reasons why it may exist and explore its historical performance with a simple option-selling strategy.
Working Paper
Causes and Consequences of Margin Levels in Futures Markets
February 28, 2014
Using a Freedom of Information Act request, we obtained a data set on margin requirements for 16 commodity futures contracts, and used it to explore how margins are set and to test the existing theories on the implications of changing margin levels.
Journal Article
Covering the World: Global Evidence on Covered Calls
July 7, 2017
Covered call strategies may be decomposed, using a risk and performance attribution methodology, into three components: equity exposure, short volatility exposure, and equity timing. This paper applies that attribution methodology to covered calls on 11 global indexes.
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.
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
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.
White Paper
Covered Calls and Their Unintended Reversal Bet
June 2, 2014
Equity index covered calls have historically realized returns not much less than their underlying index with significantly less volatility.