Universität zu Köln

Brinkmann, Felix and Korn, Olaf (2018). Risk-adjusted option-implied moments. Rev. Deriv. Res., 21 (2). S. 149 - 174. NEW YORK: SPRINGER. ISSN 1573-7144

Full text not available from this repository.

Abstract

This paper provides a new way of converting risk-neutral moments into the corresponding physical moments, which are required for many applications. The main theoretical result is a new analytical representation of the expected payoffs of put and call options under the physical measure in terms of current option prices and a representative investor's preferences. This representation is then used to derive analytical expressions for a variety of ex-ante physical return moments, showing explicitly how moment premiums depend on current option prices and preferences. As an empirical application of our theoretical results, we provide option-implied estimates of the representative stock market investor's disappointment aversion using S&P 500 index option prices. We find that disappointment aversion has a procyclical pattern. It is high in times of high index levels and declines when the index falls. We confirm the view that investors with high risk aversion and disappointment aversion leave the stock market during times of turbulence and reenter it after a period of high returns.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Brinkmann, Felix UNSPECIFIED UNSPECIFIED UNSPECIFIED Korn, Olaf UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-182166
DOI:	10.1007/s11147-017-9136-4
Journal or Publication Title:	Rev. Deriv. Res.
Volume:	21
Number:	2
Page Range:	S. 149 - 174
Date:	2018
Publisher:	SPRINGER
Place of Publication:	NEW YORK
ISSN:	1573-7144
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language VOLATILITY; PREMIUM; SKEWNESS; AVERSION; PRICES; STOCKS Multiple languages Business, Finance; Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/18216