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Using Option Pricing Information to Time Diversify Portfolio Returns

In: Options — 45 years since the Publication of the Black–Scholes–Merton Model The Gershon Fintech Center Conference

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  • M. S. Scholes

Abstract

The following sections are included:Average Returns are the Main FocusCompound Return Facts: Tail Risks Dominate!Compound Returns a Function of RiskBig Problem: Tail Events More Frequent than Normal DistributionThink Tails of the Distribution: Concentrate on Normal EventsRelative Performance EvaluationInvestment Strategies — Asset Allocation Static Constraints are CostlyFactors that Affect Terminal WealthMeasuring Tail Risk Using Market PricesTail Gains/Losses from Opiton PricesEnhancing Compound Returns Through Dynamic Risk Management (1996—2015)Using Option Prices to Forecast Risk Changing Risk ProactivelyUsing Option Prices to Measure RiskUncertainty of the Distribution of ReturnsAdaptive Strategy — Pre and Post “2008” CrisisIssues

Suggested Citation

  • M. S. Scholes, 2023. "Using Option Pricing Information to Time Diversify Portfolio Returns," World Scientific Book Chapters, in: David Gershon & Alexander Lipton & Mathieu Rosenbaum & Zvi Wiener (ed.), Options — 45 years since the Publication of the Black–Scholes–Merton Model The Gershon Fintech Center Conference, chapter 1, pages 1-15, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811259142_0001
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    More about this item

    Keywords

    Options; Call; Put; Stock; Equity; Bond; Debt; Dividend; Investment; Diversification; Volatility; Black–Scholes; Merton Model; Stochastic; Swap; Commodity; Index; Contingent Claims; Exotic Option;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G1 - Financial Economics - - General Financial Markets
    • C - Mathematical and Quantitative Methods
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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