Option-implied risk-neutral moments are widely used throughout the asset pricing literature. In this paper, we characterize the information content of such option-implied moments, accounting for the market incompleteness inherent in empirical option markets. Our analysis relies on novel model-free bounds for a large class of risk-neutral moments built from a given option cross-section, which allow us to quantify the associated valuation uncertainty.
- Speaker
- Date
- Thursday 18 Sep 2025, 12:00 - 13:00
- Type
- Seminar
- Room
- ET-14
- Location
- Campus Woudestein
(joint with Oleg Bondarenko, Paul Schneider, and Fabio Trojani)
We show that these bounds are infinite for almost all popular risk-neutral moments used in the literature, including the VIX, such that these moments cannot be reliably determined in practice. The lack of robustness in the specification of risk-neutral moments has effects that are profound both quantitatively and qualitatively, with ramifications for many well-known theories and empirical findings based upon them. As an alternative, we propose new robust moments and investigate their implications for the literature.
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- More information
For more information please contact the Secretariat Econometrics at eb-secr@ese.eur.nl
