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When Did The Smart Money in Enron Lose Its' Smirk?

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  • Bruce Mizrach

    (Rutgers University)

Abstract

The Enron Corporation went from a $65 billion dollar market capitalization to bankruptcy in just 16 months. Using statistical techniques for extracting the implied probability distributions built into option prices, I examine the market's expectation of Enron's risk of collapse. I find that the "smart money" remained far too optimistic about the stock until just weeks before their bankruptcy filing.

Suggested Citation

  • Bruce Mizrach, 2002. "When Did The Smart Money in Enron Lose Its' Smirk?," Departmental Working Papers 200224, Rutgers University, Department of Economics.
    • Handle: RePEc:rut:rutres:200224
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    File URL: http://www.sas.rutgers.edu/virtual/snde/wp/2002-24.pdf
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    References listed on IDEAS

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    Cited by:

    1. Haas, Markus & Mittnik, Stefan & Mizrach, Bruce, 2006. "Assessing central bank credibility during the ERM crises: Comparing option and spot market-based forecasts," Journal of Financial Stability, Elsevier, vol. 2(1), pages 28-54, April.

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    More about this item

    Keywords

    Enron; implied probability distributions; options;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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