Skewness Risk Premium in the Options Market

Skewness of return is a statistical measure that captures the asymmetry of the distribution of an asset’s returns over a specified period. It is particularly important in risk management and option pricing, where the skewness of returns can affect the valuation of derivatives and the construction of portfolios. Reference  …

Retail Options Traders’ Behaviour

Retail investors are individual, non-professional investors who buy and sell securities, such as stocks, options, and mutual funds, for their personal accounts rather than for an organization or institution. Unlike institutional investors, who manage large sums of money on behalf of clients or large entities, retail investors typically trade in …

Syndicate: Definition, Types, Importance, Meaning, Examples

Syndicates play a big role in today’s business world – they are important because they bring together different corporations to achieve common goals. This teamwork helps in sharing resources and reducing risks. By working together, companies can tackle bigger projects and reach wider markets. Understanding syndicates can help people see …

Modeling Short-term Implied Volatilities in the Heston Stochastic Volatility Model

Stochastic volatility models, unlike constant volatility models, which assume a fixed level of volatility, allow volatility to change. These models, such as the Heston model, introduce an additional stochastic process to account for the variability in volatility, providing a more nuanced understanding of market dynamics. By incorporating factors like mean …

Real Account: Definition, Example, Meaning, vs Nominal Account,

Accounts in accounting are systematic records that categorize and track financial transactions related to a specific aspect of a business. They serve as the building blocks of financial statements, providing a structured way to organize and report financial information. They may have several types based on specific criteria. One of …

Realized Volatility, the Good and the Bad

Realized volatility (RV) refers to the actual movement of an asset’s price over a specific period, typically measured using high-frequency data. Unlike implied volatility, which is derived from options prices and reflects market expectations, realized volatility is computed from historical price data and provides an empirical measure of how much …

Stock Returns After Extreme Loss Events

An extreme loss event in the stock market refers to a sudden and significant decline in stock prices, often resulting from unexpected and severe market conditions. These events, also known as market crashes or financial crises, can be triggered by a variety of factors including economic downturns, geopolitical tensions, natural …

Term Structure of Expected Stock Returns

In the financial literature and media, we often encounter the concept of term structure, such as the term structure of volatility and the term structure of interest rates. Reference introduced the concept of term structure of expected stock returns. Essentially, the authors utilize options data to first calculate a …