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| Author: | Driessen, J. Maenhout, P. |
| Title: | An empirical portfolio perspective on option pricing anomalies |
| Journal: | Review of finance
2007 : DEC, VOL. 11:4, p. 561-603 |
| Index terms: | finance investments securities options pricing |
| Language: | eng |
| Abstract: | This paper empirically examines economic benefits of giving investors (hereafter as: invts.) access to index options in the standard portfolio problem. Analyzed are both expected-utility and non-expected-utility invts. to understand who optimally buys and sells options. Using data on S&P 500 index options, it is always found optimal to short out-of-the-money puts and at-the-money straddles by constant relative risk aversion (CRRA) invts. etc. Loss-averse and disappointment-averse invts. optimally hold short option positions. Only with highly distorted probability assessments can positive portfolio weights for puts and straddles be obtained. |
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