Equity Portfolio Management Using Option Price Information

29 Pages Posted: 4 Apr 2014

See all articles by Peter Christoffersen

Peter Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School; Aarhus University - CREATES

Xuhui (Nick) Pan

Tulane University

Date Written: April 2, 2014

Abstract

We survey the recent academic literature that uses option-implied information to construct equity portfolios. Studies show that equity managers can earn a positive alpha by using information in individual equity options, by using stocks' exposure to information in market index options, and by using stocks' exposure to crude oil option information. Option-implied information can also help construct better mean-variance portfolios and better estimates of market beta.

Keywords: option-implied volatility; commodity futures; cross-section of stocks; option-implied beta; mean-variance optimization.

JEL Classification: G12

Suggested Citation

Christoffersen, Peter and Pan, Xuhui (Nick), Equity Portfolio Management Using Option Price Information (April 2, 2014). Rotman School of Management Working Paper No. 2419587. Available at SSRN: https://ssrn.com/abstract=2419587 or http://dx.doi.org/10.2139/ssrn.2419587

Peter Christoffersen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5P 3C4
Canada
416-946-5511 (Phone)

HOME PAGE: http://www.christoffersen.com

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Aarhus University - CREATES

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Xuhui (Nick) Pan (Contact Author)

Tulane University ( email )

7 McAlister Dr.
New Orleans, LA 70118
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
452
rank
58,380
Abstract Views
2,529
PlumX