Risk-Neutral Skewness: Evidence from Stock Options

By Patrick J. Dennis, Stewart Mayhew. 2002

435 citations recorded by the source corpus.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/18c3ff5e874544d0ee0ac4600a3c0da4b4284317

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Citations in the corpus

The Normal Inverse Gaussian Distribution and the Pricing of Derivatives (2009, methodology): “4See Conrad, Dittmar, and Ghysels [2007] for further discussion and also Dennis and Mayhew [2002] who study the effect of discretization bias and show that its magnitude is typically not important. 5The values with respect to C-type Gram-Charlier expansion are taken from Rompolis and Tzavalis [2007]”
The implied volatility smirk (2008, methodology): “Matching the two option pricing formulas in (27) and (21) with three conditions in (25) yields Proposition 4.”
Explaining Asset Pricing Puzzles Associated with the 1987 Market Crash (2011, neutral): “This is in contrast to the high persistence of the volatility shocks in the BY (2004) calibration, and more akin to the calibration in Drechsler and Yaron (2008). This feature is important in the presence of jumps to volatility, since with a highly persistent Ω process, as in BY (2004), volatility w”
Financial Reporting Opacity and Expected Crash Risk: Evidence from Implied Volatility Smirks (2014, background): “On the other hand, Hutton et al. (2009) show a negative relation between realized crash risk and leverage and Dennis and Mayhew (2002) show a positive relation between their risk-neutral skewness measure and leverage, both of which imply a 8 Note that Dennis and Mayhew’s (2002) risk-neutral…”
Illiquidity Premia in the Equity Options Market (2018, background): “Furthermore, we control for firm-specific characteristics such as size and leverage which have been shown to affect the distribution of options prices, see for instance Dennis and Mayhew (2002) and Duan and Wei (2009).”
Stock Options and Credit Default Swaps: A Joint Framework for Valuation and Estimation (2010, background): “Dennis and Mayhew (2002) and Bakshi, Kapadia, and Madan (2003) examine the negative skew of the implied volatility plot for individual stock options.”
Nominal price illusion (2016, methodology): “…Kapadia, and Madan (2003) show that the risk neutral skewness is 8 The model-free risk neutral measure of Bakshi, Kapadia, and Madan (2003) has been widely used in the literature (Dennis and Mayhew, 2002; Han, 2008; Bali and Murray, 2013; and Conrad, Dittmar, and Ghysels, 2013, among others).”
Investor Sentiment and Option Prices (2008, neutral): “This is confirmed by Dennis and Mayhew (2003). A monthly return horizon is used (i.”
Failure is an Option: Impediments to Short Selling and Options Prices (2009, background): “Dennis and Mayhew (2000) examine the contribution of various measures of market risk and sentiment on individual index options and find that both are correlated with the smile.”