Option prices, particularly those of out-of-the-money equity index puts, are difficult to justify in a no-arbitrage framework. This paper shows how limits to arbitrage affect the relative pricing of out-of-the-money put vs. call options (option-implied skewness). Decomposing the price of skewness into ex-post realized skewness and a skewness risk premium in commodity futures options markets, I ...

We propose a new modeling approach to option valuation, in which the volatility and skewness of returns are functions of three distinct, but dependent, stochastic components: Two components modeling short and long run volatility risk and a third component capturing shocks to return skewness that are unspanned by shocks to volatility. The model state dynamics follows a matrix jump diffusion, pro...

The generalized lambda distribution (GLD) is a flexible four parameter distribution with many practical applications. L-moments of the GLD can be expressed in closed form and are good alternatives for the central moments. The L-moments of the GLD up to an arbitrary order are presented, and a study of L-skewness and L-kurtosis that can be achieved by the GLD is provided. The boundaries of L-skew...

Previous research has shown that the returns on individual properties and listed property securities are skewed (Young and Gra¤ 1995 and Liu et al. 1992). This claim is investigated in the context of listed UK property companies. In particular, the shape of the conditional distribution of total monthly returns is examined for a group of 20 companies listed continuously since 1970. Also investig...

This paper investigates whether the skewness of firm fundamentals is informative about future firm performance and stock returns. We present two distinct preference-free theoretical models of firm fundamentals, both of which imply a positive relation between the skewness of firm fundamentals and expected stock return. Consistent with this implication, we show empirically that the skewness measu...

The probability distribution of daily Northern Hemisphere streamfunction fluctuations at 500 hPa in winter is skewed at most locations. Large positive anomalies are more likely north of 50N with maximum values of the skewness in the North Pacific and North Atlantic region. In this study we develop two novel methodologies in order to diagnose the underlying circulation structures associated with...