Default Risk and Option Returns

References

• Amihud Y (2002) Illiquidity and stock returns: Cross-section and time-series effects. J. Financial Markets 5(1):31–56.Crossref, Google Scholar
• An B-J, Ang A, Bali TG, Cakici N (2014) The joint cross section of stocks and options. J. Finance 69(5):2279–2337.Crossref, Google Scholar
• Andreou PC (2015) Effects of market default risk on index option risk-neutral moments. Quant. Finance 15(12):2021–2040.Crossref, Google Scholar
• Ang A, Hodrick RJ, Xing Y, Zhang X (2006) The cross-section of volatility and expected returns. J. Finance 61(1):259–299.Crossref, Google Scholar
• Avramov D, Chordia T, Jostova G, Philipov A (2013) Anomalies and financial distress. J. Financial Econom. 108(1):139–159.Crossref, Google Scholar
• Bai J, Bali TG, Wen Q (2019) Common risk factors in the cross-section of corporate bond returns. J. Financial Econom. 131(3):619–642.Crossref, Google Scholar
• Bakshi G, Kapadia N (2003a) Delta-hedged gains and the negative market volatility risk premium. Rev. Financial Stud. 16(2):527–566.Crossref, Google Scholar
• Bakshi G, Kapadia N (2003b) Volatility risk premiums embedded in individual equity options: Some new insights. J. Derivatives 11(1):45–54.Crossref, Google Scholar
• Bali TG, Murray S (2013) Does risk-neutral skewness predict the cross-section of equity option portfolio returns? J. Financial Quant. Anal. 48(4):1145–1171.Crossref, Google Scholar
• Bali TG, Cakici N, Whitelaw RF (2011) Maxing out: Stocks as lotteries and the cross-section of expected returns. J. Financial Econom. 99(2):427–446.Crossref, Google Scholar
• Banz RW (1981) The relationship between return and market value of common stocks. J. Financial Econom. 9(1):3–18.Crossref, Google Scholar
• Bharath ST, Shumway T (2008) Forecasting default with the Merton distance to default model. Rev. Financial Stud. 21(3):1339–1369.Crossref, Google Scholar
• Boyer BH, Vorkink K (2014) Stock options as lotteries. J. Finance 69(4):1485–1527.Crossref, Google Scholar
• Campbell JY, Hilscher J, Szilagyi J (2008) In search of distress risk. J. Finance 63(6):2899–2939.Crossref, Google Scholar
• Cao J, Han B (2013) Cross section of option returns and idiosyncratic stock volatility. J. Financial Econom. 108(1):231–249.Crossref, Google Scholar
• Carr P, Wu L (2009) Variance risk premiums. Rev. Financial Stud. 22(3):1311–1341.Crossref, Google Scholar
• Carr P, Wu L (2011) A simple robust link between American puts and credit protection. Rev. Financial Stud. 24(2):473–505.Crossref, Google Scholar
• Chen N, Kou SG (2009) Credit spreads, optimal capital structure, and implied volatility with endogenous default and jump risk. Math. Finance 19(3):343–378.Crossref, Google Scholar
• Chen B, Gan Q, Vasquez A (2021) Does the options market underreact to firms’ left-tail risk? Working paper, Shanghai International Studies University, China.Google Scholar
• Choi J, Richardson M (2016) The volatility of a firm’s assets and the leverage effect. J. Financial Econom. 121(2):254–277.Crossref, Google Scholar
• Christoffersen P, Jacobs K, Ornthanalai C (2012) Dynamic jump intensities and risk premiums: Evidence from S&P 500 returns and options. J. Financial Econom. 106(3):447–472.Crossref, Google Scholar
• Christoffersen P, Goyenko R, Jacobs K, Karoui M (2017) Illiquidity premia in the equity options market. Rev. Financial Stud. 31(3):811–851.Crossref, Google Scholar
• Conrad J, Kapadia N, Xing Y (2014) Death and jackpot: Why do individual investors hold overpriced stocks? J. Financial Econom. 113(3):455–475.Crossref, Google Scholar
• Cox JC, Ross SA, Rubinstein M (1979) Option pricing: A simplified approach. J. Financial Econom. 7(3):229–263.Crossref, Google Scholar
• Cremers M, Weinbaum D (2010) Deviations from put-call parity and stock return predictability. J. Financial Quant. Anal. 45(2):335–367.Crossref, Google Scholar
• Cremers M, Driessen J, Maenhout P (2008) Explaining the level of credit spreads: Option-implied jump risk premia in a firm value model. Rev. Financial Stud. 21(5):2209–2242.Crossref, Google Scholar
• Culp CL, Nozawa Y, Veronesi P (2018) Option-based credit spreads. Amer. Econom. Rev. 108(2):454–488.Crossref, Google Scholar
• Diether KB, Malloy CJ, Scherbina A (2002) Differences of opinion and the cross section of stock returns. J. Finance 57(5):2113–2141.Crossref, Google Scholar
• Fama EF, French KR (1992) The cross-section of expected stock returns. J. Finance 47(2):427–465.Crossref, Google Scholar
• Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J. Financial Econom. 33(1):3–56.Crossref, Google Scholar
• Fama EF, French KR (2006) Profitability, investment and average returns. J. Financial Econom. 82(3):491–518.Crossref, Google Scholar
• Fama EF, French KR (2015) A five-factor asset pricing model. J. Financial Econom. 116(1):1–22.Crossref, Google Scholar
• Frazzini A, Pedersen LH (2022) Embedded leverage. Rev. Asset Pricing Stud. 12(1):1–52.Google Scholar
• Geske R, Subrahmanyam A, Zhou Y (2016) Capital structure effects on the prices of equity call options. J. Financial Econom. 121(2):231–253.Crossref, Google Scholar
• Goyal A, Saretto A (2009) Cross-section of option returns and volatility. J. Financial Econom. 94(2):310–326.Crossref, Google Scholar
• Hull J, White A (1995) The impact of default risk on the prices of options and other derivative securities. J. Banking Finance 19(2):299–322.Crossref, Google Scholar
• Jarrow RA, Turnbull SM (1995) Pricing derivatives on financial securities subject to credit risk. J. Finance 50(1):53–85.Crossref, Google Scholar
• Jegadeesh N (1990) Evidence of predictable behavior of security returns. J. Finance 45(3):881–898.Crossref, Google Scholar
• Jegadeesh N, Titman S (1993) Returns to buying winners and selling losers: Implications for stock market efficiency. J. Finance 48(1):65–91.Crossref, Google Scholar
• Johnson H, Stulz R (1987) The pricing of options with default risk. J. Finance 42(2):267–280.Crossref, Google Scholar
• Kelly BT, Pruitt S, Su Y (2019) Characteristics are covariances: A unified model of risk and return. J. Financial Econom. 134(3):501–524.Crossref, Google Scholar
• Kou SG (2002) A jump-diffusion model for option pricing. Management Sci. 48(8):1086–1101.Link, Google Scholar
• Merton RC (1974) On the pricing of corporate debt: The risk structure of interest rates. J. Finance 29(2):449–470.Google Scholar
• Muravyev D, Pearson ND (2020) Options trading costs are lower than you think. Rev. Financial Stud. 33(11):4973–5014.Crossref, Google Scholar
• Muravyev D, Pearson ND, Pollet JM (2020) Why do price and volatility information from the options market predict stock returns? Working paper, Michigan State University, US.Google Scholar
• Muravyev D, Pearson ND, Pollet JM (2022) Is there a risk premium in the stock lending market? Evidence from equity options. J. Finance 77(3):1787–1828.Crossref, Google Scholar
• Palazzo B (2012) Cash holdings, risk, and expected returns. J. Financial Econom. 104(1):162–185.Crossref, Google Scholar
• Todorov V (2010) Variance risk-premium dynamics: The role of jumps. Rev. Financial Stud. 23(1):345–383.Crossref, Google Scholar
• Vasquez A (2017) Equity volatility term structures and the cross section of option returns. J. Financial Quant. Anal. 52(6):2727–2754.Crossref, Google Scholar
• Vassalou M, Xing Y (2004) Default risk in equity returns. J. Finance 59(2):831–868.Crossref, Google Scholar
• Weinbaum D, Fodor A, Muravyev D, Cremers M (2022) Option trading activity, news releases, and stock return predictability. Preprint, submitted August 16, http://dx.doi.org/10.2139/ssrn.2544344.Google Scholar
• Xing Y, Zhang X, Zhao R (2010) What does the individual option volatility smirk tell us about future equity returns? J. Financial Quant. Anal. 45(3):641–662.Crossref, Google Scholar
• Zhan X, Han B, Cao J, Tong Q (2022) Option return predictability. Rev. Financial Stud. 35(3)1394–1442.Crossref, Google Scholar