S&P 500 Index, an Option Implied Risk Analysis

Giovanni Barone-Adesi, Chiara Legnazzi and Carlo Sala
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Giovanni Barone-Adesi: Swiss Finance Institute
Chiara Legnazzi: Swiss Finance Institute
Carlo Sala: ESADE Business School

No 16-62, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The forward looking nature of option prices provides a natural model-free way to extract different risk measures. Not relying on any distributional assumptions, the option implied VaR and CVaR are naturally back testable risk measures where the elicitability requirement is no longer an issue. Tested on the 2005-2015 S&P 500 Index and options data and placing a focus on the financial crisis, the obtained results appear to be superior with respect to the classical risk measures. This is especially true in periods of high volatility, where a proper risk estimation is needed the most.

Keywords: Option Prices; Risk Measures; VaR and CvaR; Elicitability; S&P 500 Index (search for similar items in EconPapers)
JEL-codes: G13 G17 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2016-11
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1662

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