S&amp;P 500 Index, an Option Implied Risk Analysis

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2016 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Giovanni Barone-Adesi; Chiara Legnazzi; Carlo Sala;

doi: 10.2139/ssrn.2866353 , 10.2139/ssrn.3162037

S&P 500 Index, an Option Implied Risk Analysis

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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.

Related Organizations

Swiss Finance Institute
Switzerland
Universita della Svizzera Italiana
Switzerland

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