option The returns and risk of alternative calloptionportfolio investment strategies, Merton, R. C., Scholes, M. S., & Gladstein, M. L. (1978). Journal of Business, 183-242. As earlier discovered in our previous paper on the strategies of call-option, uncovered put-option-writing and protective put-option-buying could be used by investors to create patterns of returns for investment portfolios that can be reproduced by any easy strategy of combining the stock with income that has fixed securities. These put options are related as term insurance. It entails insuring against a loss in value of underlying stock: insurance is sold by investors that use the uncovered put writing strategies and investors buy insurance that guides against the stock value within a portfolio by the use of protective put-option-buying strategies. No other strategy can be dominated even by put strategy or call strategy if the options are not priced well. Optionstrategies: Good deals and margin calls, Santa-Clara, P., & Saretto, A. (2009). Journal of Financial Markets,12(3), 391-417. Theres a provision of evidence about the economic importance that trading frictions have on both the execution and profitability of option strategies that includes writing out-of-the-money put options. Particularly, margin requirements reduce the notional amount of capital that can be invested in both the force investors and strategies to realize losses and close down positions. When the investor seeks to write options more aggressively, the effect of the economy is stronger. In reducing counterparty default risk, margins are effective. Also, they impose friction that reduces investors from supplying liquidity to the market option. The economics of IPO stabilisation, syndicates andnakedshorts, Jenkinson, T., & Jones, H. (2007). European Financial Management,13(4), 616-642. Stabilization can be said to be the purchase and bidding for forms of securities by an underwriter just after an offering for the aim of preventing price fall.stabilization can also be said to be the manipulation of price that is allowed by regulators, although, within strict limits basically, stabilization should not be above the offered price. A false market, for market authorities and legislators, is a price worth paying for in an orderly market. A comparison between the rationale for regulators that allow IPO stabilization and its effect is carried out by this paper.       Time to outlawnakedcredit default swaps, Mnchau, W. (2010). Financial Times,28. Most especially in regions like the Eurozone, as much as bans are not meant to be proposed, it is difficult to understand the reason why trade in credit default swaps is still allowed without owning the underlying securities. In the Eurozone, they are subject to a series of speculative attacks, a public ban on exposed CDs shouldnt be a brainer. These naked CDs are a mere choice instrument for individuals that engage in large bets against the European governments, especially in Greece. The chairman of the Federal Reserve, Ben Bernanke, reported about the investigation of several questions that relate to companies like Goldman Sachs in their derivatives agreements with Greece. A non-parametricoptionpricing model: theory and empirical evidence, Chen, R. R., & Palmon, O. (2005). Review of Quantitative Finance and Accounting,24(2), 115-134. An empirically-based, non-parametric option pricing model is studied in this paper. It is to evaluate the S&P 500 index options. The fact is that the model is derived within the exact measure, a pricing equilibrium model rather than no-arbitrage must be assumed. Using previous S&P 500 index returns histogram, it is found that almost all volatility smile that is documented in the literature disappears. TheNakedCommodityOptionContract as a Security, Long, J. C. (1973). Wm. & Mary L. Rev.,15, 211. An empirical-distribution-basedoptionpricing model: A solution to the volatility smile puzzle, Chen, R. R., & Palmon, O. (2002). There is a traditional attribution of the volatility smile that is developed by the Black-Scholes model, and this attribution is to an inappropriately assumed return distribution. Studies in the past use other specifications like stochastic volatility and jump-diffusion models. These specifications do not, however, take away the smile. Das and Sundaram (1999) documented the return distribution generated by stochastic volatility and diffusion models that jump and do not match the key characteristics of realized returns. An alternative valuation is constructed to price S&P call options by the use of histogram from the previous S&P 500 index daily returns. A cumulative prospect theory approach tooptionpricing, Versluis, C., Lehnert, T., & Wolff, C. (2010). It is popularly known from the practical option on pricing literature, that under standard pricing assumptions, those specific option prices reflect persistent and systematic deviations from values that are theoretical. Several substantial enhancements have been brought forward, and these enhancements leave investors preferred choice towards unmodified risk this paper studies options within cumulative prospect theory. Two prospect pricing models are distinguished on if cash flows are considered to be either segregated or aggregated over time. The effect of different degrees of prospect behavior is a numerical example provided to highlight these effects. Simulations of transaction costs and optimal rehedging, Mohamed, B. (1994). Applied Mathematical Finance,1(1), 49-62. Issues of hedging options within proportional transaction cost are addressed by this paper. The assumption by the Black-Scholes is that markets without frictions and can replicate payoff option exactly by continuous rehedging. In cases where transaction costs are involved, the frequency in rehedging leads to errors in replication. The evaluation of several rehedging strategies by Monte Carlo simulations is what this paper attempts to document. The construction of the simulation is such that transaction cost and hedging errors are separated and this permits the relative trade-offs inspection. It is shown that approximations that are analytical to utility maximization approach are simple to implement and also effective. Dooptionmarkets undo restrictions on short sales? Evidence from the 2008 short-sale ban, Grundy, B. D., Lim, B., & Verwijmeren, P. (2012). Journal of Financial Economics,106(2), 331-348. The level of effectiveness of a sanction is dependent on the cost of avoiding its restrictions. It is examined if bearish option strategies were alternatives for short sales during the September 2008 short-sale ban. A significant diminution in options volume was found, and a huge increase in option bid-ask spreads for stocks that are banned and relative to unbanned stock within the banned period. Violations of the put-call parity bound were more frequent for stocks banned during the ban period. It is concluded that the ban acted as an effective restriction on trading options. Spreading Strategies in CBOE Options: Evidence on Market Performance, Gombola, M. J., Roenfeldt, R. L., & Cooley, P. L. (1978). Journal of Financial Research,1(1), 35-44.