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SUMMARY: Product Market Competition and Option Prices - Morellec\, Erwan (
 SFI)
DTSTART:20170504T120000Z
DTEND:20170504T130000Z
UID:TALK66743@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Most firms face some form of competition in product markets. T
 he degree of competition a firm faces feeds back into its cash flows and a
 ffects the values of the securities it issues. We demonstrate that\, throu
 gh its effects on stock prices\, product market competition also affects t
 he prices of options on equity and naturally leads to an inverse relations
 hip between equity returns and volatility\, generating a negative volatili
 ty skew in option prices. Using a large sample of U.S. equity options\, we
  provide empirical support for this finding and demonstrate the importance
  of accounting for product market competition when explaining the cross-se
 ctional variation in option skew.
LOCATION:Room W4.03 Judge Business School
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