Equity Portfolio Management Using Option Price Information

Peter Christoffersen and Xuhui (Nick) Pan ()
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Xuhui (Nick) Pan: Tulane University, A.B. Freeman School of Business, Postal: New Orleans, LA 70118, United States

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We survey the recent academic literature that uses option-implied information to construct equity portfolios. Studies show that equity managers can earn a positive alpha by using information in individual equity options, by using stocks' exposure to information in market index options, and by using stocks' exposure to crude oil option information. Option-implied information can also help construct better mean-variance portfolios and better estimates of market beta.

Keywords: option-implied volatility; commodity futures; cross-section of stocks; option-implied beta; mean-variance optimization. (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 29
Date: 2014-04-02
New Economics Papers: this item is included in nep-rmg
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