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Working Paper
Forecasting the Distribution of Option Returns
December 12, 2018
We propose a method for constructing conditional option return distributions.
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.
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.
Perspective
Wild but Not Crazy
February 15, 2018
Just how volatile was the recent market ride? Cliff Asness puts the volatility into perspective in terms of both its absolute and surprise levels.
Journal Article
Pathetic Protection: The Elusive Benefits of Protective Puts
February 24, 2017
Conventional wisdom is that put options are effective drawdown protection tools.
Journal Article
A Winner in the Prestigious Fama-DFA Prizes: Betting Against Correlation: Testing Theories of the Low-Risk Effect
February 15, 2017
“Betting Against Correlation: Testing Theories of the Low-Risk Effect” won second place in the Journal of Financial Economics’ 2020 Fama-DFA Prizes for Capital Markets and Asset Pricing. We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).
Journal Article
The Low-Volatility Anomaly: Market Evidence on Systemic Risk vs. Mispricing
January 29, 2016
Researchers have demonstrated a long-term connection between future stock returns and various measures of prior stock price variability.
Journal Article
Covered Call Strategies: One Fact and Eight Myths
October 21, 2014
Call overwriting is a method of simultaneously expressing a view on a security and its volatility, and the CBOE S&P 500 BuyWrite Index (BXM) is one of many ways to get exposure to the equity and volatility risk premia.
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.