WTI crude oil option-implied VaR and CVaR: An empirical application

Giovanni Barone Adesi, Mira Antonietta, Carlo Sala

Producció científica: Document de treball


Estimating the market's subjective distribution of future returns by means of backward-looking historical data leads to an uninformative and, at best, partially-conditional measure. What is missing are the investors' forward-looking beliefs. This long-lasting problem affects a huge amount of literature and leads to puzzles and suboptimal results. This paper proposes a new market-based, flexible and highly informative non-parametric method to estimate a conditional and time-varying physical measure. Starting from the classical approach, that relies on historical data only, the proposed measure is completed through the informational content of the implied moments of the option prices. The revised density, a mixture of different sources of information, combines the options forward-looking knowledge with the historical background provided by stock returns thus encoding past, present and future information. As a natural test, the new measure is used to investigate extensively the pricing kernel monotonicity.
Idioma originalAnglès
Nombre de pàgines57
Estat de la publicacióPublicada - 1 de gen. 2017


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