The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Value of Wildcard Options
Published: 03/01/1994 | DOI: 10.1111/j.1540-6261.1994.tb04426.x
JEFF FLEMING, ROBERT E. WHALEY
Wildcard options are embedded in many derivative contracts. They arise when the settlement price of the contract is established before the time at which the wildcard option holder must declare his intention to make or accept delivery and the exercise of the wildcard option closes out the underlying asset position. This paper provides a simple method for valuing wildcard options and illustrates the technique by valuing the sequence of wildcard options embedded in the S&P 100 index (OEX) option contract. The results show that wildcard options can account for an economically significant fraction of OEX option value.
Information, Trading, and Volatility: Evidence from Weather‐Sensitive Markets
Published: 01/11/2007 | DOI: 10.1111/j.1540-6261.2006.01007.x
JEFF FLEMING, CHRIS KIRBY, BARBARA OSTDIEK
We find that trading‐ versus nontrading‐period variance ratios in weather‐sensitive markets are lower than those in the equity market and higher than those in the currency market. The variance ratios are also substantially lower during periods of the year when prices are most sensitive to the weather. Moreover, the comovement of returns and volatilities for related commodities is stronger during the weather‐sensitive season, largely due to stronger comovement during nontrading periods. These results are consistent with a strong link between prices and public information flow and cannot be explained by pricing errors or changes in trading activity.
The Economic Value of Volatility Timing
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00327
Jeff Fleming, Chris Kirby, Barbara Ostdiek
Numerous studies report that standard volatility models have low explanatory power, leading some researchers to question whether these models have economic value. We examine this question by using conditional meanm‐variance analysis to assess the value of volatility timing to short‐horizon investors. We find that the volatility timing strategies outperform the unconditionally efficient static portfolios that have the same target expected return and volatility. This finding is robust to estimation risk and transaction costs.
Implied Volatility Functions: Empirical Tests
Published: 12/17/2002 | DOI: 10.1111/0022-1082.00083
Bernard Dumas, Jeff Fleming, Robert E. Whaley
Derman and Kani (1994), Dupire (1994), and Rubinstein (1994) hypothesize that asset return volatility is a deterministic function of asset price and time, and develop a deterministic volatility function (DVF) option valuation model that has the potential of fitting the observed cross section of option prices exactly. Using S&P 500 options from June 1988 through December 1993, we examine the predictive and hedging performance of the DVF option valuation model and find it is no better than an ad hoc procedure that merely smooths Black–Scholes (1973) implied volatilities across exercise prices and times to expiration.