J. Jackwerth, G. Vilkov, “Asymmetric Volatility Risk: Evidence from Option Markets,” (Working Paper Series, presented by Grigory Vilkov at the OptionMetrics Research Conference 2013)

Abstract: We show how to extract the expected risk-neutral correlation between risk-neutral distributions of the market index (S&P 500) return and its expected volatility (VIX). Comparing the implied correlation with its realized counterpart reveals a significant index-to-volatility correlation risk premium. It compensates for the fear of rising and enduring volatility due to market crashes and measures a new dimension of … Read More »


L/ Tsiaras, “The Forecast Performance of Competing Implied Volatility Measures: The Case of Individual Stocks” (Working Paper Series, presented by Leonidas Tsiaras at the OptionMetrics Research Conference 2013)

Abstract: This study examines the information content of alternative implied volatility measures for the 30 components of the Dow Jones Industrial Average Index from 1996 until 2007. Along with the popular Black-Scholes and \model-free” implied volatility expectations, the recently proposed corridor implied volatility (CIV) measures are explored. For all pair-wise comparisons, it is found that a CIV measure that is … Read More »


Tse Chun Lin, Xiaolong Lu and Joost Driessen, “Why Do Option Prices Predict Stock Returns?,” (Working Paper Series, presented by Xiaolong Lu at the OptionMetrics User Conference 2012)

Abstract: We study the role of analysts and options traders in the information transmission between options and stock markets. We first show that the predictive power of option implied volatilities (IVs) on stock returns more than doubles around analyst-related events, indicating that a significant proportion of the options predictability on stock returns comes from informed options traders’ information about upcoming … Read More »


J. Du, N. Kapadia, “Tail and Volatility Indices from Option Prices,” (Working Paper Series, presented by Nikunj Kapadia at the OptionMetrics Research Conference 2013)

Abstract: Both volatility and the tail of stock return distributions are impacted by discontinuities or large jumps in the stock price process. In this paper, we construct a model-free jump and tail index by measuring the impact of jumps on the Chicago Board Options Exchange’s VIXindex. Our jump and tail index is constructed from a portfolio of risk-reversals using 30-day … Read More »


S. Figlewski, “What is Risk Neutral Volatility?” (Working Paper Series, presented by Stephen Figlewski at the OptionMetrics Research Conference 2013)

Abstract: A security’s expected payoff under the real world distribution for stock returns includes risk premia to compensate investors for bearing different types of stock market risk. But Black-Scholes and the great majority of derivatives valuation models developed from it produce the same option prices as would be seen under modified probabilities in a world of investors who were indifferent … Read More »


D. Chance, T. Hanson, W. Li, J. Muthuswamy, “The Impact of Computational Error on the Volatility Smile,” (Working Paper Series, presented by Jayaram Muthuswamy at the OptionMetrics Research Conference 2013)

Abstract: It is well-known that the market prices of options produce implied volatilities that inexplicably vary by exercise price in a pattern often referred to as the volatility smile. This paper shows that not only do market prices produce volatility smiles, but so do model prices. This result occurs because of root finding algorithms, tolerance assumptions, numerical precisions, and quotation … Read More »


H. Chen, S. Ni, S. Joslin, “Demand for Crash Insurance, Intermediary Constraints, and Stock Returns,” (Working Paper Series, presented by Hui Chen at the OptionMetrics Research Conference 2013)

H. Chen, S. Ni, S. Joslin, “Demand for Crash Insurance, Intermediary Constraints, and Stock Returns,” (Working Paper Series, presented by Hui Chen at the OptionMetrics Research Conference 2013) DownloadRead More »


T. Chemmanur, C. Ornthanalai, P. Kadiyala, “Options on initial Public Offerings,” (Working Paper Series, presented by Chayawat Ornthanalai at the OptionMetrics Research Conference 2013)

Abstract: We analyze the determinants and consequences of option listing on IPO firm stock. We find that options are listed earlier on venture-backed and lower-reputation underwriter IPOs (Initial Public Offerings). We find a significant decrease in stock returns immediately after option listing, persisting for a year. Analyzing the determinants of this equity underperformance, we find a permanent threefold increase in … Read More »


B. Boyer, K. Vorkink, “Stock Options as Lotteries,” (Accepted paper presented by K. Vorkink at the OptionMetrics Research Conference 2013) (June 20th, 2013). Journal of Finance, Forthcoming.

Abstract: We investigate the relationship between ex-ante total skewness and holding returns on individual equity options. Recent theoretical developments predict a negative relationship between total skewness and average returns, in contrast to the traditional view that only coskewness should be priced. We find, consistent with recent theory, that total skewness exhibits a strong and negative relationship with average option returns. … Read More »


Y. Zhang, Y. Xu, S. Yan, “Attention on Options,” (Working Paper Series, presented by Yuzhao Zhang at the OptionMetrics Research Conference 2013)

Abstract: This paper investigates the impact of retail investor attention, measured by Google search frequency, on option trading and option pricing as well as stock return volatility. We document a significant positive relation between Google search volume and future option trading activity of retail investors. Moreover, retail investors tend to take more bullish option positions following increased attention. Although option … Read More »