Generalized Option Betas

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Author(s)
Husmann, Sven
Todorova, Neda
Griffith University Author(s)
Year published
2013
Metadata
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This paper extends the option betas presented by Cox and Rubinstein (1985) and Branger and Schlag (2007). In par- ticular, we show how the beta of the underlying asset affects both an option's covariance beta and its asset pricing beta. In contrast to Branger and Schlag (2007), the generalized option betas coincide if the options are evaluated according to the CAPM option pricing model of Husmann and Todorova (2011). The option betas are presented in terms of Black- Scholes option prices and are therefore easy to use in practice.This paper extends the option betas presented by Cox and Rubinstein (1985) and Branger and Schlag (2007). In par- ticular, we show how the beta of the underlying asset affects both an option's covariance beta and its asset pricing beta. In contrast to Branger and Schlag (2007), the generalized option betas coincide if the options are evaluated according to the CAPM option pricing model of Husmann and Todorova (2011). The option betas are presented in terms of Black- Scholes option prices and are therefore easy to use in practice.
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Journal Title
Journal of Mathematical Finance
Volume
3
Copyright Statement
© 2013 The authors and SciRes. This is an Open Access article distributed under the terms of the Creative Commons Attribution 3.0 Unported (CC BY 3.0) License (http://creativecommons.org/licenses/by/3.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Subject
Finance
Applied Mathematics
Banking, Finance and Investment