Research
Discover the latest research papers written by OptionMetrics,
our customers, and researchers worldwide leveraging
OptionMetrics data.
F. Chabi-Yo, C. Dim, G. Vilkov: Generalized Bounds on the Conditional Expected Excess Return on Individual Stocks
We derive generalized bounds on conditional expected excess returns. The bounds deliver consistent expected returns for individual and index-type assets, are conditionally tight, account for all risk-neutral moments of returns, and outperform runner-up models for out-of-sample predictions. Bounds calibrated to ... Read More
K. Aretz, I. Garrett, A. Gazi: Taking Money Off the Table: Suboptimal Early Exercises, Risky Arbitrage, and American Put Returns
Many studies report that American option investors often exercise their positions suboptimally late. Yet, when that can happen in case of puts, there is an arbitrage opportunity in perfect markets, exploitable by longing the asset-and-riskfree-asset portfolio replicating the put and ... Read More
I. Drechsler, A. Moreira, A. Savov: Liquidity and Volatility
Liquidity provision is a bet against private information: if private information turns out to be higher than expected, liquidity providers lose. Since information generates volatility, and volatility co-moves across assets, liquidity providers have a negative exposure to aggregate volatility shocks. ... Read More
J. Jackwerth: Does the Ross recovery theorem work empirically?
Starting with the fundamental relation that state prices are the product of physical probabilities and the stochastic discount factor, Ross (2015) shows that, given strong assumptions, knowing state prices suffices to back out physical probabilities and the stochastic discount factor ... Read More
N. Fusari, R. Jarrow, S. Lamichhane: Testing for Asset Price Bubbles using Options Data
We present a new approach to identifying asset price bubbles based on options data. Given their forward-looking nature, options are ideal instruments with which to investigate market expectations about the future evolution of asset prices, which are key to understanding ... Read More
J. Doran and E. Payzan-LeNestour: Craving for Money? Empirical Evidence from the Laboratory and the Field
In a series of controlled laboratory experiments, we provide evidence for “Craving by Design” (CbD) hypothesis, where people knowingly expose themselves to negative tail risk due to craving for monetary gains. We then document the “cheap call selling anomaly:” selling ... 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.