Events Calendar
Oct 10
14:00 - 15:00
CeQuFin Seminar - Kevin Aretz
CeQuFin Seminar
The early exercise risk premium

We study the difference in expected returns between American and equivalent European put options to understand the asset pricing implications of the possibility to early exercise an option. Neoclassical finance theory suggests that the difference is positive, increases with option moneyness, and decreases with option time-to-maturity and the underlying asset's idiosyncratic volatility. Comparing the returns of exchange-traded single-stock American put options with the returns of equivalent synthetic European put options, our empirical work strongly supports these predictions. Our results are surprising given other studies often find investors' option exercising strategies to be non-rational.

Seminar Topic:

The Relation between Trading Volume and Realised Volatility: an analysis of Tokyo Commodity Exchange (TOCOM) energy futures

Speaker:

Kevin Aretz - University of Manchester

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Location

KS6,
Keynes College,
University of Kent,
Canterbury,
Kent,
CT2 7NP
United Kingdom
Map

Details

Contact: Dr Nikolaos Voukelatos
E: N.Voukelatos@kent.ac.uk
Kent Business School

 

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Last Updated: 10/01/2012