Date: Tuesday, 25 February 2025, at 2.30pm (CET)

Dual format: ESSEC Paris La Défense (CNIT), Room 201
and via Zoom, please click here

We consider a panel model for a large cross-section of equity options implied volatilities surfaces that depend on moneyness and time to maturity and whose dynamics are determined by common scalar factors. To reduce the dimensionality of the problem, we assume the response functions to the factors are representable through common fixed functional components and idiosyncratic scalar coefficients. We use the idiosyncratic coefficients to construct equity options portfolios that exploit the idea of 'beta-sorted portfolios' in the implied volatility space. The shape of each common component is informative for designing economically meaningful strategies that exploit volatility, skewness, and termstructure risk. We find significant alphas for the long-short portfolios. This is a joint work with P. Santucci de Magistris, A. Popa and F. Violante.

Kind regards,
Jeremy Heng, Olga Klopp, Roberto Reno, Marie Kratz and Riada Djebbar (Singapore Actuarial Society - ERM)