Forecasting with option-implied information
This chapter surveys the methods available for extracting information from option prices that
can be used in forecasting. We consider option-implied volatilities, skewness, kurtosis, and …
can be used in forecasting. We consider option-implied volatilities, skewness, kurtosis, and …
Capturing option anomalies with a variance-dependent pricing kernel
P Christoffersen, S Heston… - The Review of Financial …, 2013 - academic.oup.com
We develop a GARCH option model with a new pricing kernel allowing for a variance
premium. While the pricing kernel is monotonic in the stock return and in variance, its …
premium. While the pricing kernel is monotonic in the stock return and in variance, its …
Probability weighting functions implied in options prices
V Polkovnichenko, F Zhao - Journal of Financial Economics, 2013 - Elsevier
The empirical pricing kernels estimated from index options are non-monotone (Rosenberg
and Engle, 2002; Bakshi, Madan, and Panayotov, 2010) and the corresponding risk …
and Engle, 2002; Bakshi, Madan, and Panayotov, 2010) and the corresponding risk …
A data-driven framework for consistent financial valuation and risk measurement
In this paper, we propose a general data-driven framework that unifies the valuation and risk
measurement of financial derivatives, which is especially useful in markets with thinly-traded …
measurement of financial derivatives, which is especially useful in markets with thinly-traded …
Retrieving risk neutral densities from European option prices based on the principle of maximum entropy
LS Rompolis - Journal of Empirical Finance, 2010 - Elsevier
This paper suggests a new method of implementing the principle of maximum entropy to
retrieve the risk neutral density of future stock, or any other asset, returns from European call …
retrieve the risk neutral density of future stock, or any other asset, returns from European call …
Impact of FFC distributed generations in a DNR in the presence of renewable and load uncertainties by mixed‐discrete particle swarm‐based point estimation method
This study presents the uncertainty analysis of a distribution network (DNR) caused by unit
power output control (UPC) distributed generations (DGs)(solar, wind) and load demand by …
power output control (UPC) distributed generations (DGs)(solar, wind) and load demand by …
Option pricing with maximum entropy densities: The inclusion of higher‐order moments
OM Ardakani - Journal of Futures Markets, 2022 - Wiley Online Library
Entropy pricing applies notions of information theory to derive the theoretical value of
options. This paper employs the maximum entropy (ME) formulation of option pricing, given …
options. This paper employs the maximum entropy (ME) formulation of option pricing, given …
Volatility risk premium implications of GARCH option pricing models
I Papantonis - Economic modelling, 2016 - Elsevier
In this paper we explore important implications of capturing volatility risk premium (VRP)
within a parametric GARCH setting. We study the transmission mechanism of shocks from …
within a parametric GARCH setting. We study the transmission mechanism of shocks from …
Extracting market information from equity options with exponential Lévy processes
FJ Fabozzi, A Leccadito, RS Tunaru - Journal of Economic Dynamics and …, 2014 - Elsevier
Lévy processes have been successfully applied in the modeling of financial assets. Useful
information such as implied volatility, skewness, and risk-preferences can be derived from …
information such as implied volatility, skewness, and risk-preferences can be derived from …
A non-structural investigation of VIX risk neutral density
We propose a non-structural method to retrieve the risk-neutral density (RND) implied by
options on the CBOE Volatility Index (VIX). The methodology is based on orthogonal …
options on the CBOE Volatility Index (VIX). The methodology is based on orthogonal …