Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/70483 
Year of Publication: 
2013
Series/Report no.: 
CFR Working Paper No. 11-08 [rev.]
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
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

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