N. Branger, H. Hulsbusch, T. F. Middelhoff, “Idiosyncratic Volatility, its Expected Variation, and the Cross-Section of Stock Returns”

This paper explains the negative relation between the realized idiosyncratic volatility (IVOL) and expected returns. Using implicit information from the cross-section of options we extract expectations about the volatility of idiosyncratic volatility (IVOLVOL) in an almost model-free fashion. We show that IVOL is mean-reverting and that IVOLVOL serves as proxy for the meanreversion speed. Running double sorts on both measures … Read More »


J. Faias, P. Santa-Clara, “Optimal Option Portfolio Strategies: Deepening the Puzzle of Index Option Mispricing”

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… Read More »


OptionMetrics to Present at Global EQD 2016

OptionMetrics’ President and Founder, David Hait, will be kicking off the conference with a presentation titled “What Implied Volatility Tells Us About Future Asset Returns,” where he’ll share insights on how main findings from recent trends in academic papers can be applied from an operational perspective… Read More »