Research
Discover the latest research papers written by OptionMetrics,
our customers, and researchers worldwide leveraging
OptionMetrics data.
S. P. Clark, Y. (Jacques) Lu, and W. Tian: Extracting Forward Equity Return Expectations Using Derivatives
This paper develops a framework for extracting conditional expectations of future equity returns from derivative prices. We show that expected returns can be identified not only at the spot horizon, but also for forward-starting investment periods, yielding the full surface of expected future ... Read More
Z. Fan, M. Wang, and Y. Ye: On Options-Driven Realized Volatility Forecasting: Information Gains via Rough Volatility Model
We examine whether model-based spot volatility estimators extracted from traded options data enhance the predictive power of the Heterogeneous Autoregressive (HAR) model for realized volatility. Specifically, we infer spot volatility under the rough stochastic volatility model via an iterative two-step ... Read More
M. Reiner: Pricing of Climate Event Risks and Opportunities in the Options Market
This paper investigates whether climate policy event risks are priced ex ante in the options market. I show both theoretically and empirically that option prices increase with a firm's absolute exposure to climate change, regardless of direction. I develop a model ... Read More
Y. Yang and T. M. Hospedales: Neural Fractional Stochastic Differential Equations
Fractional-order differential equations (FDEs) excel at modelling systems with long-range memory, but many such systems also exhibit stochastic behaviour. While existing neural differential equation models can capture either memory effects (Neural FDEs) or stochastic dynamics (Neural SDEs), a unified framework ... Read More
B. H. Doan, D. Jayasuriya, J. B. Lee, W. C. Lo, and J. J. Reeves: Neutralizing Market Risk with Backward and Forward Looking Betas
In this paper we provide advances in the methodology of market neutral portfolio management through utilizing both backward and forward looking betas. Backward looking betas are computed from realized beta estimators with high frequency stock returns and forward looking betas ... Read More
U. Kurucak, V. K. Nanda, and B. Yayvak: Leniency Laws and Lucrative Trades: The Impact of Antitrust Policy on Insider Profits
We study the impact of antitrust enforcement on insiders' trading profits. The notion is that trading profits and product market collusion are related because collusion enhances insiders' informational advantage. Using staggered crosscountry adoption of leniency laws, we show stronger enforcement ... Read More
Highlighted Research
Reducing Risk through Multifactors: Implied Variance Asymmetry and Implied Beta
By G. DeSimone & O. Shih
February 15, 2024
OptionMetrics' latest study challenges conventional risk assessment using metrics like implied variance asymmetry (IVA), calculated as the measure of downside variance relative to upside variance, and option-implied beta strategies.