tag:blogger.com,1999:blog-1527840491496268397.post5372375204927691405..comments2024-03-08T11:20:30.095-07:00Comments on Credit Bubble Stocks: Paper: "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?"Unknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1527840491496268397.post-8648506020602789562018-12-13T14:52:11.741-07:002018-12-13T14:52:11.741-07:00So, Suntech went to zero (eventually)...
"Wh...So, Suntech went to zero (eventually)...<br /><br /><i>"When there are multiple ATM and OTM options for one stock on one particular day, we further select options or weight all available options using different approaches to come up with one SKEW observation for each firm per day. Our main approach is based on the option's moneyness, which is also used in Ofek, Richardson, and Whitelaw (2004). That is, we choose one ATM call option with its moneyness closest to 1, and one OTM put option with its moneyness closest to 0.95."</i><br />CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-23995169866969863062013-02-25T12:42:11.723-07:002013-02-25T12:42:11.723-07:00Haven't read the paper, but I do have my doubt...Haven't read the paper, but I do have my doubts. Biggest declines are probably found in the stocks with the highest borrow costs, and these can easily be more than 100% annualized. Paying that a few months isn't immaterial.Alpha Vulturehttps://www.blogger.com/profile/11713888602173836514noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-81897276530893470942013-02-25T11:30:22.349-07:002013-02-25T11:30:22.349-07:00They typically don't consider borrowing costs,...They typically don't consider borrowing costs, but those are immaterial when you are talking about option skew predicting big declines within a few months.<br /><br />The procedural quirks of this paper actually detract from alpha.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-89223352578914551922013-02-25T05:29:11.931-07:002013-02-25T05:29:11.931-07:00I have an idea that all those papers ignore borrow...I have an idea that all those papers ignore borrowing costs (or lending income) when calculating Alpha.Alpha Vulturehttps://www.blogger.com/profile/11713888602173836514noreply@blogger.com