Publicação
Dispersion trading on the s&p100
| Resumo: | This study provides an empirical analysis back-testing a dispersion trading strategy to verify its performance. Dispersion trading is an arbitrage trading technique exploiting the difference between option prices of the index and its constituents. Price discrepancies are traced from literature to the correlation risk premium and net buying pressure of puts of the index. The strategy tends to outperform the general market. Cumulative returns of the strategy have beaten the Vanguard Total Market Index ETF, providing risk-adjusted returns in alpha and small beta indicating a strategy that is prone to systematic market risks. |
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| Autores principais: | Zwart, Aldert Joaquim |
| Assunto: | Options Implied volatility Implied correlation Market making Dispersion trading Market inefficiency |
| Ano: | 2022 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | This study provides an empirical analysis back-testing a dispersion trading strategy to verify its performance. Dispersion trading is an arbitrage trading technique exploiting the difference between option prices of the index and its constituents. Price discrepancies are traced from literature to the correlation risk premium and net buying pressure of puts of the index. The strategy tends to outperform the general market. Cumulative returns of the strategy have beaten the Vanguard Total Market Index ETF, providing risk-adjusted returns in alpha and small beta indicating a strategy that is prone to systematic market risks. |
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