AFA Chicago Meetings Paper. Journal of Financial Economics JFEVol.

McCombs Research Paper Series No. This paper documents a robust new finding that delta-hedged equity option return decreases monotonically with an increase in the idiosyncratic volatility of the underlying stock. This result can not be explained by standard risk factors. It is distinct from existing anomalies in the stock market or volatility-related option mispricing.

EconPapers: Cross section of option returns and idiosyncratic stock volatility

It is consistent with market imperfections and constrained financial intermediaries. Dealers charge a higher premium for options on high idiosyncratic volatility stocks due to their higher arbitrage costs.

Option return; Idiosyncratic volatility; Market imperfections; Limits to arbitrage.

Cao, Jie and Han, Bing, Cross-Section of Option Returns and Idiosyncratic Stock Volatility July 3, AFA Chicago Meetings Paper; Journal of Financial Economics JFEVol. Room CYT Building Shatin, NT Hong Kong Phone Fax.

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Subscribe to this free journal for more curated articles on this topic. Subscribe to this fee journal for more curated articles on this topic. Transform Analysis and Asset Pricing for Affine Jump-Diffusions.

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By Darrell DuffieJun PanThe Impact of Jumps in Volatility and Returns. By Michael JohannesBjorn ErakerBy Bernard DumasJeff FlemingRecovering Risk Aversion from Option Prices and Realized Returns. Recovering Probabilities and Risk Aversion from Option Prices and Realized Returns. By Mark Rubinstein and Jens Jackwerth. Stock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options. By Gurdip BakshiNikunj KapadiaBy Nikunj KapadiaGurdip Bakshi results of the stock market crash, Nonparametric Estimation of State-Price Densities Implicit in Cross-section of option returns and stock volatility Asset Prices.

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AFA Chicago Meetings Paper Journal of Financial Economics JFEVol. Jie Cao Chinese University of Hong Kong - Department of Finance Bing Han University of Toronto, Rotman School of Management.

Abstract This paper documents a robust new finding that delta-hedged equity option return decreases monotonically with an increase in the idiosyncratic volatility of the underlying stock. Jie Cao Chinese University of Hong Kong - Department of Finance email Room CYT Building Shatin, NT Hong Kong Phone Fax HOME PAGE: Bing Han Contact Author University of Toronto, Rotman School of Management email Toronto, Ontario M5S 3E6 Canada Phone.

Download this Paper Open PDF in Browser. Attilio Meucci at ARPM - Advanced Risk and Portfolio Management, Marcos Lopez de Prado at Guggenheim Partners, LLC. Derivatives eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS. Transform Analysis and Asset Pricing for Affine Jump-Diffusions By Darrell DuffieJun PanThe Impact of Jumps in Volatility and Returns By Michael JohannesBjorn ErakerEmpirical Tests By Bernard DumasJeff FlemingRecovering Risk Aversion from Option Prices and Realized Returns By Jens Jackwerth Recovering Probabilities and Risk Aversion from Option Prices and Realized Returns By Mark Rubinstein and Jens Jackwerth Stock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options By Gurdip BakshiNikunj KapadiaStock Return Characteristics, Skew Laws, and the Differential Pricing of Individual Equity Options By Nikunj KapadiaGurdip BakshiNonparametric Estimation of State-Price Densities Implicit in Financial Asset Prices By Yacine Ait-sahalia and Andrew Lo.

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Cross-section of option returns and volatility

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