The Enron Bankruptcy: When did the options market in Enron lose it’s smirk?

Bruce Mizrach

Review of Quantitative Finance and Accounting, 2006, vol. 27, issue 4, 365-382

Abstract: The Enron Corporation went from a $65 billion dollar market capitalization to bankruptcy in just 16 months. Using statistical techniques for extracting the implied probability distributions built into option prices, I examine the market’s expectation of Enron’s risk of collapse. I find that the options market remained far too optimistic about the stock until just weeks before their bankruptcy filing. Copyright Springer Science + Business Media, LLC 2006

Keywords: Volatility smile; Options; Enron; Bankruptcy (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s11156-006-0043-2

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