The DOI matches its Crossref record; 59 of the 59 references it cites were found in a registry or an index.
Model Uncertainty and Option Markets with Heterogeneous Beliefs
Abstract
This paper provides option pricing and volume implications for an economy with heterogeneous agents who face model uncertainty and have different beliefs on expected returns. Market incompleteness makes options nonredundant, while heterogeneity creates a link between differences in beliefs and option volumes. We solve for both option prices and volumes and test the joint empirical implications using S&P500 index option data. Specifically, we use survey data to build an Index of Dispersion in Beliefs and find that a model that takes information heterogeneity into account can explain the dynamics of option volume and the smile better than can reduced‐form models with stochastic volatility.
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Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Newey, W. K., & West, K. D. (1987) · Econometrica · doi:10.2307/1913610 · Cited by 16,936
A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix
Newey, W., & West, K. (1986) · National Bureau of Economic Research · doi:10.3386/t0055 · Cited by 12,278
Heston, S. L. (1993) · Review of Financial Studies · doi:10.1093/rfs/6.2.327 · Cited by 8,762
Density Estimation for Statistics and Data Analysis
(1986) · Springer eBooks · doi:10.1007/978-1-4899-3324-9 · Cited by 8,525
Theory of Rational Option Pricing
Merton, R. C. (2019) · World Scientific Reference on Contingent Claims Analysis in Corporate Finance · doi:10.1142/9789814759588_0002 · Cited by 7,948
Theory of rational option pricing
Merton, R. C. (2005) · Theory of Valuation · doi:10.1142/9789812701022_0008 · Cited by 7,161
Option pricing when underlying stock returns are discontinuous
Merton, R. C. (1976) · Journal of Financial Economics · doi:10.1016/0304-405x(76)90022-2 · Cited by 5,953
Asset Prices in an Exchange Economy
Lucas, R. E. (1978) · Econometrica · doi:10.2307/1913837 · Cited by 5,014
The Pricing of Options on Assets with Stochastic Volatilities
HULL, J., & WHITE, A. (1987) · The Journal of Finance · doi:10.1111/j.1540-6261.1987.tb02568.x · Cited by 3,807
Cited by
Losing is Optional: Retail Option Trading and Earnings Announcement Volatility
de Silva, T., Smith, K., & So, E. C. (2022) · SSRN Electronic Journal · doi:10.2139/ssrn.4050165 · Cited by 16
Metadata
- Authors
- BURASCHI, A., & JILTSOV, A.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2006-12
- Volume
- 61
- Issue
- 6
- Pages
- 2841-2897
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2142626631
- Cited by
- 346
- References
- 59
- FWCI
- 27.25
- Type
- journal article
- Language
- en
- Open access
- closed
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- BURASCHI, A., & JILTSOV, A. (2006). Model Uncertainty and Option Markets with Heterogeneous Beliefs. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2006.01006.x
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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