Understanding Expected Option Returns
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Date: 12-04-2006
Start Time:
6:00pm
End Time: 7:30pm
Speaker: Michael Johannes, Graduate School of Business, Columbia University
Location: 412 Schapiro CEPSR, Davis Auditorium
Abstract
It appears to be a common perception that certain types of index options are mispriced, in the sense that the returns to various option trading strategies are excessive relative to the risks embedded in these positions. In fact, some go as far to refer to these returns as puzzles or anomalous. In this paper, we analyze the statistical evidence for mispricing based on option returns. We analyze the statistical properties of option returns, and conclude that option returns are not informative about mispricing.
Bio
Professor Johannes's research analyzes the empirical content of fixed-income and derivative securities pricing models. He is particularly interested in developing econometric methods to investigate models with jumps and stochastic volatility. Johannes teaches the elective Capital Markets and Investments and a Ph.D. course on continuous-time methods in finance.