Volatility and expected option returns: A note

Volatility and expected option returns: A note

We show analytically that the relationship between asset volatility and expected option return is ambiguous. Numerical results elaborate how the direction and magnitude of the relationship depend on asset beta and volatility levels, and option moneyness and maturity.

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Bibliographische Detailangaben
Veröffentlicht in:Economics letters 2017-03, Vol.152, p.1-4
1. Verfasser: Chaudhury, Mo
Format: Artikel
Sprache:eng
Schlagworte:
Cross-section of option returns
Expected option return
Expected returns
Maturity
Studies
Volatility
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Beschreibung
Zusammenfassung:We show analytically that the relationship between asset volatility and expected option return is ambiguous. Numerical results elaborate how the direction and magnitude of the relationship depend on asset beta and volatility levels, and option moneyness and maturity.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2016.12.014