WG Risk : "Common factors in large panels of equity options"

The Working Group on Risk - CREAR, with the support of the ESSEC IDO dpt/Ceressec, Institut des actuaires, Labex MME-DII (CY), and the group Risques AEF - SFdS, has the pleasure to invite you to the seminar by:

Dr. Maria GRITH, Erasmus University, Rotterdam, Holland

Dr. Maria Grith is an Assistant professor of Econometrics at Erasmus University Rotterdam. She received her Ph.D. in Economics from Humboldt University of Berlin and held postdoctoral appointments at the University of Pennsylvania, Singapore Management University, and Humboldt University of Berlin. Her research focuses on developing economically informed statistical models to address complex, high dimensional data. By integrating nonparametric statistics, functional data analysis, and machine learning, she aims to uncover new stylized facts in financial data that can lead to improved investment decisions and risk management in both traditional and emerging areas, such as options pricing and digital finance. She has published in Review of Finance, Journal of Financial Econometrics, and Statistica Sinica and has a recent article forthcoming in the Journal of Business and Economic Statistics. Dr. Grith is a coordinator of the Erasmus School of Economics Female Network, which aims to enhance the representation of women in economics. She is an Erasmus Research Institute of Management (ERIM) fellow and an Institute of Digital Assets (IDA) member.

“Common factors in large panels of equity options”

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.

Dual format:

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