Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/289189 
Year of Publication: 
2020
Citation: 
[Journal:] Review of Derivatives Research [ISSN:] 1573-7144 [Volume:] 24 [Issue:] 2 [Publisher:] Springer US [Place:] New York, NY [Year:] 2020 [Pages:] 95-133
Publisher: 
Springer US, New York, NY
Abstract: 
It is a widely known theoretical derivation, that the firm’s leverage is negatively related to volatility of stock returns, although the empirical evidence is still outstanding. To empirically evaluate the leverage we first complement previous simulation studies by deriving theoretical predictions of leverage changes on the volatility smile. Even more important, we empirically test these predictions with an event study using intra-day Eurex option data and a unique data set of 138 ad-hoc news. For our theoretically derived predictions we observe that changes in leverage of DAX companies from 1999 to 2014 cause significant changes to the implied volatility smile.
Subjects: 
Implied volatilty smile
Leverage effect
Event study
Tick data
JEL: 
C13
G32
G14
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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