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Equity Portfolio Management Using Option Price Information

Author

Listed:
  • Peter Christoffersen

    (University of Toronto, Rotman School of Management and CREATES)

  • Xuhui (Nick) Pan

    (Tulane University, A.B. Freeman School of Business)

Abstract

We survey the recent academic literature that uses option-implied information to construct equity portfolios. Studies show that equity managers can earn a positive alpha by using information in individual equity options, by using stocks' exposure to information in market index options, and by using stocks' exposure to crude oil option information. Option-implied information can also help construct better mean-variance portfolios and better estimates of market beta.

Suggested Citation

  • Peter Christoffersen & Xuhui (Nick) Pan, 2014. "Equity Portfolio Management Using Option Price Information," CREATES Research Papers 2015-05, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:create:2015-05
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    File URL: https://repec.econ.au.dk/repec/creates/rp/15/rp15_05.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    option-implied volatility; commodity futures; cross-section of stocks; option-implied beta; mean-variance optimization.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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