Option valuation models are based on an arbitrage strategy—hedging the option against the
underlying asset and rebalancing continuously until expiration—that is only possible in a …

… ’s well-informed prediction of the underlying asset’s future … into conformance with the market’s
volatility expectations may not be … ’s best forecast of future volatility of the underlying asset. …

Implied volatility is widely believed to be informationally superior to historical volatility,
because it is the “market’s” forecast of future volatility. But for S&P 100 index options, the most …

Standard approaches to designing a futures hedge often suffer from two major problems. First,
they focus only on minimizing risk, so no account is taken of the impact on expected return…

… begin by applying Figlewski's … s , t − 1 contains the average short interest value for stock s
in the year prior to the year for which the return is measured. SI.Option s , t − 1 is equal to SI s , t …

IN EARLY 1982, TRADING BEGAN at three different exchanges in futures contracts based
on stock indexes. Stock index futures were an immediate success, and quickly led to a …

… From equation (3) investors in set L hold long positions and those in S hold short
positions. Clearly, the composition of the groups is a function of the current market price P . …

… Letting V be an Arrow–Debreu state claim that pays H(S T ) = $1 in state S T and nothing
otherwise, we get the pointwise relationship between the P- and Q-densities as 3 …

FUTURES MARKETS FOR AGRICULTURAL commodities have existed for well over 100
years. Recently there has been a major expansion of futures trading into nontraditional areas, …

We explore how general economic conditions impact defaults and major credit rating changes
by fitting reduced-form Cox intensity models with a broad range of macroeconomic and …