TY  - BOOK
AU  - Culp,Christopher L.
AU  - Gandhi,Mihir
AU  - Nozawa,Yoshio
AU  - Veronesi,Pietro
ED  - National Bureau of Economic Research.
TI  - Option-Implied Spreads and Option Risk Premia
T2  - NBER working paper series
PY  - 2021///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - June 2021; Hardcopy version available to institutional subscribers
N2  - We propose implied spreads (IS) and normalized implied spreads (NIS) as simple measures to characterize option prices. IS is the credit spread of an option's implied bond, the portfolio long a risk-free bond and short a put option. NIS normalizes IS by the risk-neutral default probability and reflects tail risk. IS and NIS are countercyclical and predict implied bond returns, while neither, like implied volatility, predicts put returns. These opposite predictability results are consistent with a stochastic volatility, stochastic jump intensity model, as put premia increase in volatility but decrease in jump intensity, while implied bond premia increase in both
UR  - https://www.nber.org/papers/w28941
UR  - http://dx.doi.org/10.3386/w28941
ER  -