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Garrett DeSimone, Head of Quantitative Research at OptionMetrics
Jun 18, 2024
Garrett DeSimone, Head of Quantitative Research at OptionMetrics, discusses his dissertation on event risk premia in single stocks and the implications for option pricing. They delve into the impact of macro events on options trading, the challenges of pricing options accurately, and the evolving nature of option markets. They also explore hedging strategies in a low VIX environment, portfolio scaling using implied downside volatility, and developing a model for calculating implied dividends in the options market.
48:44
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Quick takeaways
- Holding straddles on key macro news days may lead to substantial losses due to inflated implied volatility levels.
- Implied dividends show a diminishing risk premium, indicating reduced market volatility and improved risk assessments among investors.
Deep dives
PhD Dissertation on Event Pricing and Straddles
Analyzing the earnings event risk premium for stocks, Garrett DeSimone's dissertation revealed that holding straddles on specific macro news days led to substantial losses. Examining the inflated implied volatility levels before key macro events, like CPI releases, showed the risk of owning straddles. This study highlighted the systemic risk compensation element tied to market volatility dynamics.
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