Information Uncertainty and the Puzzle of Option-Implied Skewness

Item Type Conference or Workshop Item (Lecture)
Abstract We show empirically that option-implied quantile skewness is priced differently depending on which portion of the risk-neutral distribution it is estimated from: Quantile skewness estimated from the tail (center) of the risk-neutral distribution is positively (negatively) related to future stock returns. Our results are consistent with investors who rely on information from traded options and disregard information from the extrapolated volatility surface. Furthermore, we find that quantile skewness is highly correlated with central skewness but more robust. Estimates of quantile skewness are accurate even if option prices span a small domain, have large gaps between strikes, and are noisy.
Authors Ammann, Manuel & Feser, Alexander
Journal or Publication Title 20th ANNUAL CONFERENCE OF THE SWISS SOCIETY FOR FINANCIAL MARKET RESEARCH
Language English
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Quantitative Economic Methods
Date 31 March 2017
Place of Publication Zürich
Event Title 20th ANNUAL CONFERENCE OF THE SWISS SOCIETY FOR FINANCIAL MARKET RESEARCH
Event Location Zürich
Event Dates 31.03.2017
Contact Email Address alexander.feser@unisg.ch
Depositing User Alexander Feser
Date Deposited 21 Jun 2017 12:17
Last Modified 20 Jul 2022 17:31
URI: https://www.alexandria.unisg.ch/publications/251063

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Ammann, Manuel & Feser, Alexander: Information Uncertainty and the Puzzle of Option-Implied Skewness. [Conference or Workshop Item]

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https://www.alexandria.unisg.ch/id/eprint/251063
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