scholarly journals Expected Option Returns and the Structure of Jump Risk Premia

2009 ◽  
Author(s):  
Nicole Branger ◽  
Alexandra Hansis ◽  
Christian Schlag
Keyword(s):  
Risk Premia ◽  
Jump Risk ◽  
Option Returns ◽  
Expected Option Returns

scholarly journals Expected Option Returns

2001 ◽  
Vol 56 (3) ◽  
pp. 983-1009 ◽  
Author(s):  
Joshua D. Coval ◽  
Tyler Shumway
Keyword(s):  
Option Returns ◽  
Expected Option Returns

Volatility and Expected Option Returns

2019 ◽  
Vol 55 (3) ◽  
pp. 1025-1060 ◽  
Author(s):  
Guanglian Hu ◽  
Kris Jacobs
Keyword(s):  
Stock Returns ◽  
Expected Return ◽  
Cross Sectional ◽  
Stock Volatility ◽  
Option Returns ◽  
Put Option ◽  
Expected Stock Returns ◽  
Alternative Measures ◽  
Expected Option Returns ◽  
Equity Option

We analyze the relation between expected option returns and the volatility of the underlying securities. The expected return from holding a call (put) option is a decreasing (increasing) function of the volatility of the underlying. These predictions are supported by the data. In the cross section of equity option returns, returns on call (put) option portfolios decrease (increase) with underlying stock volatility. This finding is not due to cross-sectional variation in expected stock returns. It holds in various option samples with different maturities and moneyness, and is robust to alternative measures of underlying volatility and different weighting methods.

Expected option returns during the post-GFC era

2020 ◽  
Vol 49 (2) ◽  
pp. 118-131
Author(s):  
Cheng Yan ◽  
Xiaoli Wu
Keyword(s):  
Option Returns ◽  
Expected Option Returns

Volatility and jump risk in option returns

2020 ◽  
Vol 40 (11) ◽  
pp. 1767-1792
Author(s):  
Biao Guo ◽  
Hai Lin
Keyword(s):  
Jump Risk ◽  
Option Returns

On the Nature of Jump Risk Premia

2019 ◽  
Author(s):  
Piotr Orłowski ◽  
Paul Georg Schneider ◽  
Fabio Trojani
Keyword(s):  
Risk Premia ◽  
Jump Risk

Conditional equity risk premia and realized variance jump risk

2014 ◽  
Vol 40 (2) ◽  
pp. 295-317 ◽  
Author(s):  
Zhanglong Wang ◽  
Kent Wang ◽  
Zheyao Pan
Keyword(s):  
Risk Premia ◽  
Realized Variance ◽  
Jump Risk ◽  
Equity Risk

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.

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