In addition, most of the world's industrialized nations have stock exchanges.Among the larger international exchanges are those in London, England; Paris, France; Milan, Italy; Hong Kong, China; Toronto, Canada; and Tokyo, Japan.Moreover, OTM options displace other types of lottery securities in the stock and option markets when available.
Consistent with this commonality, the RNS anomaly is strongest in periods of post-recession rebounds and high market volatility when momentum crashes occur.
Furthermore, the momentum anomaly is strongest (weakest) in stocks with …
Stocks with high option-implied risk-neutral skewness (RNS) have positive abnormal returns driven by rebounds following poor performance.
This performance reversal in past loser stocks also underlies momentum crashes.
In addition, the paper derives a closed form relationship between the prices of variance swaps and VIX futures. Read More » According to the Recovery Theorem (Ross, 2015), options data can reveal the market’s true, contemporaneous expectations about a specific future horizon.
We implement empirically the theorem’s approach to separate implied (risk-neutral) volatility into 1) Ross-recovered true expected volatility and 2) a risk preference component, using Optionmetrics Ivy option data for the S&P500 index and four European indices (FTSE, CAC, SMI, …
Read More » This paper studies the effects of default risk on equity option returns.
We examine the cross section of delta-hedged equity option returns for Optionmetrics stock for the period January 1996 to April 2016.
Read More » We show that the availability of options to retail investors displaces lottery stocks.
We also find that investors are willing to pay substantial premiums only for the lottery characteristics of out-of-the-money options.