S&P 500 Index, an Option-Implied Risk Analysis

46 Pages Posted: 16 Apr 2018 Last revised: 30 Apr 2018

See all articles by Giovanni Barone-Adesi

Giovanni Barone-Adesi

University of Lugano; Swiss Finance Institute

Chiara Legnazzi

Swiss Finance Institute

Carlo Sala

ESADE Business School

Date Written: April 12, 2018

Abstract

The forward-looking nature of option market data allows one to derive economically-based and model-free conditional risk measures. The option-implied methodology is a tool for regulators and companies to perform external or internal risk analysis without posing assumptions on the distribution of returns. The article proposes the first comprehensive and extensive analysis of the performances of these measures compared with classical risk measures for the S&P500. Delivering good results both at short and long time horizons, the option-implied estimates emerge as a convenient alternative to the existing risk measures.

Keywords: Option Prices, VaR and CVaR, Long and Short-term Risk Measures, S&P 500 Index

JEL Classification: G13, G32, D81

Suggested Citation

Barone-Adesi, Giovanni and Legnazzi, Chiara and Sala, Carlo, S&P 500 Index, an Option-Implied Risk Analysis (April 12, 2018). Swiss Finance Institute Research Paper No. 18-29. Available at SSRN: https://ssrn.com/abstract=3162037 or http://dx.doi.org/10.2139/ssrn.3162037

Giovanni Barone-Adesi (Contact Author)

University of Lugano ( email )

Via Buffi 13
CH-6904 Lugano
Switzerland
+41 58 666 4671 (Phone)
+41 58 666 46 47 (Fax)

Swiss Finance Institute

c/o University of Geneva
40 Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Chiara Legnazzi

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Carlo Sala

ESADE Business School ( email )

Avenida de Torreblanca 59
Barcelona, Barcelona 08172
Spain

HOME PAGE: http://www.people.usi.ch/salaca

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