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S&P 500 Index, an Option Implied Risk Analysis

Author

Listed:
  • Giovanni Barone-Adesi

    (Swiss Finance Institute)

  • Chiara Legnazzi

    (Swiss Finance Institute)

  • Carlo Sala

    (ESADE Business School)

Abstract

The forward looking nature of option prices provides a natural model-free way to extract different risk measures. Not relying on any distributional assumptions, the option implied VaR and CVaR are naturally back testable risk measures where the elicitability requirement is no longer an issue. Tested on the 2005-2015 S&P 500 Index and options data and placing a focus on the financial crisis, the obtained results appear to be superior with respect to the classical risk measures. This is especially true in periods of high volatility, where a proper risk estimation is needed the most.

Suggested Citation

  • Giovanni Barone-Adesi & Chiara Legnazzi & Carlo Sala, 2016. "S&P 500 Index, an Option Implied Risk Analysis," Swiss Finance Institute Research Paper Series 16-62, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1662
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    More about this item

    Keywords

    Option Prices; Risk Measures; VaR and CvaR; Elicitability; S&P 500 Index;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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