Access the full text.
Sign up today, get DeepDyve free for 14 days.
Loading next page...
/lp/wiley/levered-and-inverse-vix-etp-option-contract-adjustments-no-harm-no-uEIsoVRxuc
References (11)
-
K. Barraclough, H. Stoll, R. Whaley (2009)
Stock Option Contract Adjustments: The Case of Special DividendsDerivatives
-
J. M. Keynes (1930)
A Treatise on Money -
(1930)
The Applied Theory of Money, MacMillan & Co.: London -
M. Rubinstein. (1983)
Displaced Diffusion Option PricingJournal of Finance, 38
-
R. C. Merton (1973)
Rational theory of option pricing, 4
-
R. Whaley (2013)
Trading Volatility: At What Cost?The Journal of Portfolio Management, 40
-
J. Cox, S. Ross, M. Rubinstein. (1979)
Option pricing: A simplified approach☆Journal of Financial Economics, 7
-
R. Merton (2015)
Theory of Rational Option PricingWorld Scientific Reference on Contingent Claims Analysis in Corporate Finance
-
F. Black, Myron Scholes (1973)
The Pricing of Options and Corporate LiabilitiesJournal of Political Economy, 81
-
Colby Pessina, R. Whaley (2020)
Levered and Inverse ETPs: Blessing or Curse?Capital Markets: Market Efficiency eJournal
-
(2009)
The dynamics of levered and inverse exchange‐traded funds
- Publisher
- Wiley
- Copyright
- Accounting and Finance © 2020 AFAANZ
- ISSN
- 0810-5391
- eISSN
- 1467-629X
- DOI
- 10.1111/acfi.12702
- Publisher site
- See Article on Publisher Site
Abstract
The terms of exchange‐traded stock option contracts are usually adjusted when corporate actions take place. These adjustments are made to safeguard the value of the outstanding option contracts. Recently, a new type of corporate event has appeared − levered and inverse exchange‐traded product issuers are reducing leverage ratios with increased frequency. While such changes directly affect option values, no contract adjustments are made, resulting in windfall transfers of wealth from outstanding long to outstanding short option holders. In one instance alone, the transfer was more than $US100 million. To remedy the problem, we offer a simple contract adjustment procedure.
Journal
Accounting & Finance – Wiley
Published: Dec 1, 2020
Keywords: ; ;