Please use this identifier to cite or link to this item:
Cici, Gjergji
Palacios, Luis-Felipe
Year of Publication: 
Series/Report no.: 
CFR Working Paper 11-08 [rev.]
Using detailed options holdings, we examine how mutual funds' use of options affects performance and risk. Using options generates, on average, no performance advantages. In fact, funds that follow certain distinct strategies underperformed. The only salutary impact is lower portfolio risk for a subset of funds that buy puts for insurance. Perhaps wanting to limit additional losses, these funds also respond to poor performance in the first part of the year by reducing portfolio risk. Our findings suggest no permanent or temporary aggressive risk taking by options users, suggesting instead that some funds use options primarily for risk management.
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
647.25 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.