FE Practitioners Seminar: Stephen Figlewski

February 12, 2018 | 6:00pm - 7:30pm

FE Practitioners Seminar: Stephen Figlewski

Schapiro CEPSR, 530 W. 120 St., New York, NY 10027 Davis Auditorium
Title: Extracting Information about Probabilities and Risk Preferences from Options Prices Abstract: Trading in options with a wide range of exercise prices and a single maturity allows a researcher to extract the market's risk neutral probability density (RND) over the underlying price at expiration. The RND contains investors' beliefs about the true probabilities blended with their risk preferences, both of which are of great interest to academics and practitioners alike. With particular focus on U.S. equity options, we will review the historical development of this powerful concept, practical details of fitting an RND to option market prices, and the many ways in which investigators have tried to distill true expectations and risk premia from observed RNDs. I will touch on areas of active current research including the "pricing kernel puzzle" and the "volatility surface," and offer thoughts on what has been learned about RNDs so far and fruitful directions for future research. Bio: Stephen Figlewski is a Professor of Finance at the New York University Leonard N. Stern School of Business. He holds a B.A. in Economics from Princeton University and a Ph.D. in Economics from the Massachusetts Institute of Technology. He has published extensively in academic journals, especially in the area of financial futures and options. He is the founding Editor of The Journal of Derivatives and he also edits the SSRN's Derivatives eJournal series published over the Internet. He is the director of the NASDAQ Derivatives Research Project, which supports research and sponsors conferences at Stern in derivatives, risk management, and financial engineering. Professor Figlewski has twice taken leaves from NYU to work on Wall Street, doing research on equity derivatives and credit-sensitive securities, and he was at one time a member of the New York Futures Exchange and a Competitive Options Trader at the New York Stock Exchange.


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