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Journal Article

Demand-Based Option Pricing

Index and equity options are notoriously difficult to price.

Working Paper

Being Right is Not Enough: Buying Options to Bet on Higher Realized Volatility

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.

Working Paper

Credit Implied Volatility

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.

Journal Article

Covering the World: Global Evidence on Covered Calls

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

Causes and Consequences of Margin Levels in Futures Markets

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.

Working Paper

Cash-Flow Maturity and Risk Premia in CDS Markets

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

Early Option Exercise: Never Say Never

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

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

Which Index Options Should You Sell?

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.

White Paper

Understanding the Volatility Risk Premium

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.