Risk-neutral return distributions as investment opportunities

Option data is used to rank investment opportunities in stocks.We avoid zero risk-neutral excess returns by focusing attention on the distribution of the next price movement.Investment opportunities are valued via the theory of acceptable risks.Fast valuation is achieved using saddle point programming. Methods for assessing investment-value-based risk-neutral distributions are developed, and nonzero mean returns are extracted by focusing on the return from the next n moves. These distributions are vacuous for many of the traditional limit laws fitted to option prices. New finite-activity models that synthesize option prices are employed to extract such distributions from option data. The resulting mean returns are risk adjusted to determine a conservative and positive financial valuation using convex sets of risk acceptability, as described in financial finance valuation theory and monetary utility theory. Fast algorithms are developed for determining scale-optimized valuations. Indexes of value are created by formulating a geometric weighted average of the daily extracted indexes. The indexes are used in a variety of trading strategies and are observed to improve performance metrics. Copyright Infopro Digital Limited. All rights reserved. You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5. If you would like to purchase additional rights please email info@risk.net