1 option
Mispriced Index Option Portfolios / George M. Constantinides, Michal Czerwonko, Stylianos Perrakis.
- Format:
- Book
- Author/Creator:
- Constantinides, George M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23708.
- NBER working paper series no. w23708
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most months over 1990-2013. Dominance is prevalent when the ATM-IV is high, right skew is low, and option maturity is short. The portfolios include mostly calls and positions are overwhelmingly short. Similar results obtain with options on the CAC and DAX indices. The results are explained neither by priced factors nor a non-monotonic stochastic discount factor.
- Notes:
- Print version record
- August 2017.
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