Hellenic Open University Conferences, International Conference on Business & Economics of the Hellenic Open University 2017

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Option-implied Risk Aversion, Risk Neutral and Real World Densities of FTSE 100 During the Brexit Referendum Period
Alexandros Mystriotis, Andrianos Tsekrekos

##manager.scheduler.building##: Titania
##manager.scheduler.room##: Platon
Date: 2017-04-22 02:00 PM – 04:00 PM
Last modified: 2017-04-11


Risk Neutral and Real world densities implied from option prices, provide us useful information about investors’ expectations regarding the future price evolution of the underlying asset. Using well-established methods from the relevant literature, we estimate implied probability density functions from FTSE 100 index options, and recover empirical estimates of investors’ risk aversion, for a period that starts with the announcement of the Brexit referendum date, to the days following the voting day. Our results indicate that densities become excessively negatively-skewed and leptokurtic as the Brexit referendum date approaches and that a dramatic change in the market perception of risk has taken place around the voting day.


Implied density functions; Brexit; Referendum; Option prices; Risk Aversion

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