{"title":"The Dynamics of Risk-Neutral Implied Moments: Evidence from Individual Options","authors":"Alexandra Hansis, Christian Schlag, G. Vilkov","doi":"10.2139/ssrn.1470674","DOIUrl":null,"url":null,"abstract":"We study the estimation, the dynamics, and the predictability of option-implied risk-neutral moments (variance, skewness, and kurtosis) for individual stocks from various perspectives. We first show that it is in the estimation of the higher moments essential to use an interpolation with a narrow grid as well as a wide interval. We show that implied moments are well explained cross-sectionally by a number of firm characteristics. We use the characteristics that have been shown to exhibit correlation with expected returns (like size and the market-to-book ratio of equity). In a next step, we investigate the joint dynamics of the three moments in a vector autoregressive model. We find that the moments are significantly linked to each other over time. Finally, adding exogenous variables to the vector autoregression improves the explanatory power of our model even further. Granger causality tests show significant differences between the three implied moments.","PeriodicalId":40006,"journal":{"name":"Journal of Derivatives","volume":"40 1","pages":""},"PeriodicalIF":0.4000,"publicationDate":"2010-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"22","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Derivatives","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.2139/ssrn.1470674","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 22
Abstract
We study the estimation, the dynamics, and the predictability of option-implied risk-neutral moments (variance, skewness, and kurtosis) for individual stocks from various perspectives. We first show that it is in the estimation of the higher moments essential to use an interpolation with a narrow grid as well as a wide interval. We show that implied moments are well explained cross-sectionally by a number of firm characteristics. We use the characteristics that have been shown to exhibit correlation with expected returns (like size and the market-to-book ratio of equity). In a next step, we investigate the joint dynamics of the three moments in a vector autoregressive model. We find that the moments are significantly linked to each other over time. Finally, adding exogenous variables to the vector autoregression improves the explanatory power of our model even further. Granger causality tests show significant differences between the three implied moments.
期刊介绍：
The Journal of Derivatives (JOD) is the leading analytical journal on derivatives, providing detailed analyses of theoretical models and how they are used in practice. JOD gives you results-oriented analysis and provides full treatment of mathematical and statistical information on derivatives products and techniques. JOD includes articles about: •The latest valuation and hedging models for derivative instruments and securities •New tools and models for financial risk management •How to apply academic derivatives theory and research to real-world problems •Illustration and rigorous analysis of key innovations in derivative securities and derivative markets
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