The Informational Content of Financial Options for Quantitative Asset Management: A Review
Athens University of Economics and Business; City University London - Cass Business School - Faculty of Finance; EDHEC Risk Institute
George S. Skiadopoulos
University of Piraeus; Queen Mary, University of London, School of Economics and Finance; City University - Faculty of Finance - Cass Business School
October 29, 2009
HANDBOOK OF QUANTITIVE ASSET MANAGEMENT, B. Scherer, K. Winston, ed., Oxford University Press, Forthcoming
This paper surveys the literature that deals with the informational content of market option prices for the purposes of quantitative asset management. We review studies that have investigated whether market option prices may help a portfolio manager in the stock selection process, portfolio construction, risk measurement and management. The main ideas are highlighted and the advantages and limitations are outlined. The use of market option prices for stock market and style timing is also discussed and some key papers on the informational role of option’s volume are presented.
Number of Pages in PDF File: 36
Keywords: Beta, Implied distributions, Implied volatility, Options, Portfolio construction, Stock selection, Value-at-Risk
JEL Classification: G1, G11, G13, G14, G34Accepted Paper Series
Date posted: November 1, 2009 ; Last revised: March 29, 2012
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