Index options: Pricing, implied densities and returns

Chapter 2 gives an overview of the literature that is directly related to the topics studied in this thesis. In Chapter 3 the impact of overnight periods on option prices is examined by estimating an option pricing model that takes overnight closures of exchanges explicitly into account. Chapter 4 proposes a model-free methodology that can be used to extract the risk-neutral distribution of future volatility from empirical option prices. The resulting density of future volatility shows some interesting characteristics. Finally, Chapter 6 investigates characteristics of investment portfolios that contain European options. Specifically, the mean-variance properties of option returns are studied in detail.