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S&P 500 Index, an Option-Implied Risk Analysis

Author

Listed:
  • Giovanni Barone-Adesi

    (Swiss Finance Institute)

  • Chiara Legnazzi

    (Swiss Finance Institute)

  • Carlo Sala

    (ESADE Business School and University of Lugano)

Abstract

The forward-looking nature of option market data allows one to derive economically-based and model-free conditional risk measures. The option-implied methodology is a tool for regulators and companies to perform external or internal risk analysis without posing assumptions on the distribution of returns. The article proposes the first comprehensive and extensive analysis of the performances of these measures compared with classical risk measures for the S&P500. Delivering good results both at short and long time horizons, the option-implied estimates emerge as a convenient alternative to the existing risk measures.

Suggested Citation

  • Giovanni Barone-Adesi & Chiara Legnazzi & Carlo Sala, 2018. "S&P 500 Index, an Option-Implied Risk Analysis," Swiss Finance Institute Research Paper Series 18-29, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1829
    as

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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3162037
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    Citations

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    Cited by:

    1. Ricardo Crisóstomo, 2021. "Estimating real‐world probabilities: A forward‐looking behavioral framework," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(11), pages 1797-1823, November.
    2. Ricardo Crisóstomo, 2021. "Estimación de probabilidades representativas del mundo real: importancia de los sesgos conductuales," CNMV Documentos de Trabajo CNMV Documentos de Trabaj, CNMV- Comisión Nacional del Mercado de Valores - Departamento de Estudios y Estadísticas.

    More about this item

    Keywords

    Option Prices; VaR and CVaR; Long and Short-term Risk Measures; S&P 500 Index;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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