Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 28, 2022 erstellt
Beschreibung:
Relying on a latent factor model with time-varying temporal dependence of systematic risk and mispricing on firm and option characteristics, we reveal economically substantial mispricing in the options market. The portfolio based on individual options alphas related to characteristics earns an out-of-sample annualized Sharpe ratio of 1.60 in call option returns and of 1.85 in put option returns. Commonly used risk factors in the stock and options markets cannot explain abnormal returns of option alpha portfolios. We show that characteristics related to risk-neutral moments and liquidity and their interactions largely contribute to option mispricing and that most characteristics that contribute to mispricing also contribute to systematic risk