Browsing by Subject "Options"

Now showing 1 - 5 of 5

Open Access
Chapter 22: Futures and options
(Edward Elgar Publishing, 2023-05-18) Gürkaynak, Refet S.; Wright, Jonathan H.
We survey the history, market structure, pricing and usage of futures and options contracts. We focus in particular on their ability to provide high-frequency measures of expectations, uncertainty, higher moments, and investor risk aversion. Futures and options are a rich and growing treasure trove of information to academics and policymakers alike.
Open Access
Currency derivatives and their applications in Turkey
(1997) Nazlı, A. Yekta
As a result of increased volatility in freely floating exchange rates, corporations and individuals were faced with currency risks after the 1970s. In order to manage these risks, new financial instruments -called derivatives- started to be used worldwide. They are currently used in a limited manner in Turkey. The main purpose of this thesis is to present the applications of over-the-counter currency derivatives in Turkey. Throughout the thesis, the reasons for lagging behind in the use of derivative instruments will be presented. Finally, policy recommendations will be made for the development of efficient currency derivatives markets.
Open Access
Optimal multi-period consumption and investment with short-sale constraints
(Elsevier, 2014-03) Arısoy, Y. E.; Altay-Salih, A.; Pınar, M. Ç.
This article examines agents’ consumption-investment problem in a multi-period pure exchange economy where agents are constrained with the short-sale of state-dependent risky contingent claims. In equilibrum, agents hold options written on aggregate consumption in their optimal portfolios. Furthermore, under the specific case of quadratic utility, the optimal risk-sharing rule derived for the pricing agent leads to a multifactor conditional consumption-based capital asset pricing model (CCAPM), where excess option returns appear as factors.
Open Access
Option-based variables and future stock returns in normal times and recessions
(Elsevier, 2024-10) Açıkalın, Özgür Şafak; Önder, Zeynep
We examine the prediction of future returns of optionable stocks trading in the US exchanges by several option-based variables for the period between 1996 and 2015. It is found that option-based variables are significant factors in estimating future stock returns in normal periods and during recessions. The spread between weighted averages of implied volatilities calculated with all call and put options of underlying stocks is found to have the highest effect on future stock returns. Although the mean squared errors of the option models are significantly higher during recessions than the expansion periods, the model with option-based variables outperforms the market model and the Fama-French Three Factor Model in both recessions and the whole sample period. The findings suggest that option-based models incorporate information about extreme events more than the traditional models.
Open Access
What do the option-based variables tell us about future returns?
(2023-08) Açıkalın, Özgür Şafak
Option-based variables reflect investors’ assessment of future risk and therefore contain information about expected stock returns. Early studies show that information flows from the options market to the equity market. Empirical evidence suggest that portfolios created using option-based variables have returns that cannot be fully explained by traditional asset pricing variables. Following Bali, Chabi-Yo and Murray (2022), this thesis examines the predictive power of option-based variables, such as the difference between call and put implied volatilities, the difference between realized volatility of the underlying stock and option implied volatility, and the change of the open interest in options. The options on stocks traded in the US stock exchanges in the period between 1996 and 2015 are analyzed. The study also investigates whether the predictive power of the option-based variables changes during periods of economic recession. The findings show that option-based variables increase the predictive power of the models when used with the traditional asset pricing variables. Option-based variables are found to be useful predictors of stock returns during recessions as well. The estimation model which includes option-based variables and stock characteristics outperforms CAPM and Fama-French three-factor model during both recession and expansion periods but the accuracy of the model is significantly lower during recessions. The model fails to estimate the future returns of high beta stocks as accurately as low beta stocks. Portfolios formed based on quintile values of the option-based variables create economically large but statistically insignificant abnormal returns.