Extraction of Market Expectations from Option Prices - Palomino Lazo, Carlos Alberto;Kanyankogote, Aimée R.
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This book estimates risk neutral parameters of a jump diffusion model, as in Bates (1991), implicit in the option prices on the S&P500 futures over the period 2006-2008. Additionally, it investigates the extent to which market participants anticipated the financial market crash of 2008. We find that high levels of skewness premium are detectable in the short maturity out-of-the-money put options as early as July 2007. Nevertheless, market expectations of an extreme downturn subsided after the collapse of Bear Stearns in April 2008. Overall, our findings indicate that the estimated parameters…mehr

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Produktbeschreibung
This book estimates risk neutral parameters of a jump diffusion model, as in Bates (1991), implicit in the option prices on the S&P500 futures over the period 2006-2008. Additionally, it investigates the extent to which market participants anticipated the financial market crash of 2008. We find that high levels of skewness premium are detectable in the short maturity out-of-the-money put options as early as July 2007. Nevertheless, market expectations of an extreme downturn subsided after the collapse of Bear Stearns in April 2008. Overall, our findings indicate that the estimated parameters show the presence of crash expectations prior to September 2008 but there is no evidence that the magnitude of the crash was predictable.
Autorenporträt
Carlos A Palomino, an economist and avid trader born in Quito, Ecuador, is devoted to teaching, research and entrepreneurial ventures. Aimée R. Kanyankogote, FRM currently works as Value at Risk Analyst for one of the top banks in Canada. Both authors hold a Master of Financial Risk Management from the Segal Graduate School of Business.