Seminar

Endogenous Option Pricing

Finance & Accounting

Speaker:Alessio Saretto, University of Texas at Dallas
Date: Wednesday 17 March 2021
Time: 16:00 - 17:00
Location: Online via Zoom (link available from J.Lashkor@exeter.ac.uk)

Further details

We show that a dynamic model of investment and capital structure choices, where the firm faces real and financial frictions, can generate option prices and implied volatilities that are in line with those of the average optionable stock. As the balance between the fundamental economic forces that are responsible for the way options are priced is state-dependent, the model is also able to generate a wide cross-sectional dispersion in implied volatility surfaces that also matches what we observe in the data.