Tail Risk Hedging: The Search for Cheap Options
研究发现，按美元价格对流动性股票期权排序并构建廉价看跌期权组合，能提供稳健的尾部风险对冲，其表现优于高级经验期权策略，机制在于不同市场条件下的相关性不对称。
The authors discover that a simple heuristic of sorting liquid equity options by dollar price to construct a portfolio of cheap put options leads to a surprisingly robust tail risk hedge—the superior performance holds even when compared against advanced empirical option strategies. Further investigation reveals the asymmetry in market correlation under different market conditions as the mechanism of this robust hedging performance. The put options selected by the heuristic comprises stocks with diverse firm characteristics. The correlation spike accompanying tail risk events leads to most of these options moving into the money, compensating for the losses incurred on a broad-base equity index holding. During normal market conditions, these options benefited from the diversification effect because of a lower market correlation, thus mitigating the portfolio drag effect.