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  • 1995
  • Working Paper

The Informational Role of Asset Prices: The Case of Implied Volatility

By: Zvi Bodie and Robert C. Merton
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  • 1995
  • Chapter

The Informational Role of Asset Prices: The Case of Implied Volatility

By: Zvi Bodie and Robert C. Merton
Keywords: Asset Pricing; Price; Volatility; Information
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  • Research Summary

Time-Varying Volatility Risk Premia

This paper provides evidence for the existence of time-varying volatility risk premia.  In doing so, it examines the evolution of the implied volatility bias in the S&P 100 from 1986-2006. Additionally, the paper proves three new results regarding the limiting... View Details
  • 2017
  • Working Paper

Economic Uncertainty and Earnings Management

By: Luke C.D. Stein and Charles C.Y. Wang
In the presence of managerial short-termism and asymmetric information about skill and effort provision, firms may opportunistically shift earnings from uncertain to more certain times. We document empirically that when financial markets are less certain about a firm's... View Details
Keywords: Discretionary Accruals; Uncertainty; Implied Volatility; Earnings Response Coefficient; Risk and Uncertainty; Earnings Management; Financial Markets
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  • January 2008
  • Background Note

Index Options

By: Joshua Coval and Erik Stafford
The goal of this simulation is to understand the patterns in index option prices that are not predicted by the Black-Scholes model. In particular, the simulation focuses on two properties of options prices. First, at-the-money implied volatilities from index options... View Details
Keywords: Volatility; Stock Options; Investment; Price; Profit; Risk Management; Mathematical Methods
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    Global Portfolio Diversification for Long-Horizon Investors

    We show that the secular upward shift in short-run cross-country correlations of stock and bond returns does not necessarily imply a decline in the benefits of global portfolio diversification for long-horizon investors. We show that this increase in correlations has... View Details
    • 2025
    • Working Paper

    How Do Households Suppress the Price of Tail Risk?

    By: Laurent Calvet, Claire Célérier, Gordon Liao and Boris Vallée
    This paper investigates the effects of the issuance of retail products with non-linear payoffs on option prices. For a given underlying asset, when the outstanding volume of products embedding a short-put position increases, implied volatility at the corresponding... View Details
    Keywords: Security Design; Dividend; Options; Structured Products; Market Segmentation; Financial Instruments; Design; Volatility; Markets; Segmentation
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    • March 2005
    • Article

    Sovereign Debt As a Contingent Claim: A Quantitative Approach

    By: Laura Alfaro and Fabio Kanczuk
    We construct a dynamic equilibrium model with contingent service and adverse selection to quantitatively study sovereign debt. In the model, benefits of defaulting are tempered by higher future interest rates. For a wide set of parameters, the only equilibrium is one... View Details
    Keywords: Sovereign Finance; Borrowing and Debt; Interest Rates; Balance and Stability; Risk and Uncertainty; Risk Management; Mathematical Methods; Management Style; Segmentation; Debt Securities; Banking Industry
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    • 27 Mar 2015
    • Working Paper Summaries

    Capital Requirements, Risk Choice, and Liquidity Provision in a Business Cycle Model

    Keywords: by Juliane Begenau; Banking; Financial Services
    • April 2023
    • Article

    Are Intermediary Constraints Priced?

    By: Wenxin Du, Benjamin Hebert and Amy Wang Huber
    Violations of no-arbitrage conditions measure the shadow cost of intermediary constraints. Intermediary asset pricing and intertemporal hedging together imply that the risk of these constraints tightening is priced. We describe a “forward CIP trading strategy” that... View Details
    Keywords: Asset Pricing; Investment Return; Risk and Uncertainty; International Finance
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    • Research Summary

    Sovereign Debt as a Contingent Claim: A Quantitative Approach (joint with Fabio Kanczuk)

    By: Laura Alfaro
    We construct a dynamic equilibrium model with contingent service and adverse selection to quantitatively study sovereign debt. In the model, benefits of defaulting are tempered by higher future interest rates. For a wide parameter, the only equilibrium is one in which... View Details
    • Research Summary

    Time Varying Expected Returns, Stochastic Dividend Yields, and Default Probabilities: Linking the Credit Risk and Equity Literature (with George Chacko and Jens Hilscher)

    In standard structural bond pricing models, the firm defaults once the market value of assets has fallen below a threshold. Expected returns, or at least dividend yields, are assumed to be constant, which implies that any asset value movement is permanent and has the... View Details
    • 2018
    • Working Paper

    Global Portfolio Diversification for Long-Horizon Investors

    By: Luis M. Viceira and Zixuan (Kevin) Wang
    This paper conducts a theoretical and empirical investigation of global portfolio diversification for long-horizon investors in the presence of permanent cash flow shocks and transitory discount rate shocks to asset prices and returns. An increase in the cross-country... View Details
    Keywords: Investment Portfolio; Risk and Uncertainty; Diversification; Capital Markets; Global Range
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    • 18 Oct 2013
    • Working Paper Summaries

    Monetary Policy Drivers of Bond and Equity Risks

    Keywords: by John Y. Campbell, Carolin E. Pflueger & Luis M. Viceira
    • Fast Answer

    Options: Historical Prices

    How do I find historical option prices? Options Metrics via WRDS provides historical price and implied volatility data for the U.S. equity and index options markets, on an option by option basis. Once you... View Details
    • 27 May 2009
    • First Look

    First Look: May 27, 2009

    prices for future consumption volatility but implies much greater predictive power of stock prices for future stock return volatility than is found in the data. Neither... View Details
    Keywords: Martha Lagace
    • 15 Jul 2008
    • First Look

    First Look: July 15, 2008

    by the Black-Scholes model. In particular, the simulation focuses on two properties of options prices. First, at-the-money implied volatilities from index options tend to be larger than the realized... View Details
    Keywords: Martha Lagace
    • 17 Nov 2003
    • Research & Ideas

    Lessons from a Nasty Trade Dispute

    seems likely that Brazil will work with Canada to arrive at mutually agreeable financing packages to be used by each country. HBS professors Rawi Abdelal and Laura Alfaro recently co-wrote a business case with Brett Laschinger on the View Details
    Keywords: by Cynthia Churchwell
    • 13 Apr 2010
    • First Look

    First Look: April 13

    horizon, implying that growth is less risky than value at long horizons. Investors with access to bills and bonds exhibit similar behavior when value and growth tilts are computed relative to the total equity allocation of the portfolio.... View Details
    Keywords: Martha Lagace
    • Web

    Bibliography - Option Pricing in Theory & Practice: The Nobel Prize Research of Robert C. Merton - Exhibits - Historical Collections

    Deposit Insurance and Other Guarantees ." Harvard Business School Working Paper No. 92-063 (January 1992). Merton, Robert C. , and Zvi Bodie. " The Informational Role of Asset Prices: The Case of Implied View Details