The Smirk in the S&P500 Futures Options Prices: a Linearized Factor Analysis
We construct portfolios of S&P500 futures and their associated options, which are Delta (price) and Vega (volatility) neutral. These systematically earn negative returns net of financing costs, and suggest that out of the money puts are too expensive, relative to out of the money calls. We give evidence that these negative returns are not a payment for insurance against a market crash. We then do a factor analysis on the Delta hedged option price innovations. Including a smirk factor, there is no evidence of arbitrage opportunities, and the risk premium on this factor accounts for the smirk. The smirk seems unable to predict the skew in the underlying return, but is related to the small firm e?ect and is useful for hedging portfolios of options.
S&P500 index futures options smirk skew.
Andrew Carverhill Terry H.F.Cheuk Sigurd Dyrting
University Grants Council of Hong Kong,China,grant number HKUST6229/97H.JEL classifications:G12,G13
国际会议
成都
英文
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）