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Inferring option-implied investors' risk preferences

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  • Daniel Giamouridis

Abstract

Risk preference functions across the wealth domain are estimated from option prices and asset realized returns using: (a) a semiparametric probability model, the Edgeworth Series Expansion model, and (b) a new data set consisting of eurodollar and WTI oil markets' data. The empirical preference functions are examined and found consistent with the market conditions of the period under study. The risk aversion estimates are also similar to these found by alternative methodologies.

Suggested Citation

  • Daniel Giamouridis, 2005. "Inferring option-implied investors' risk preferences," Applied Financial Economics, Taylor & Francis Journals, vol. 15(7), pages 479-488.
  • Handle: RePEc:taf:apfiec:v:15:y:2005:i:7:p:479-488
    DOI: 10.1080/09603100500056684
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    References listed on IDEAS

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    Cited by:

    1. Ting-Huan Chang, 2011. "Risk preference and trading motivation measurement due to moneyness: evidence from the S&P 500 Index option market," Applied Financial Economics, Taylor & Francis Journals, vol. 21(14), pages 1049-1057.

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