Review of Quantitative Finance and Accounting

, Volume 27, Issue 4, pp 365-382

First online:

The Enron Bankruptcy: When did the options market in Enron lose it’s smirk?

  • Bruce MizrachAffiliated withDepartment of Economics, Rutgers University

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The Enron Corporation went from a $65 billion dollar market capitalization to bankruptcy in just 16 months. Using statistical techniques for extracting the implied probability distributions built into option prices, I examine the market’s expectation of Enron’s risk of collapse. I find that the options market remained far too optimistic about the stock until just weeks before their bankruptcy filing.


Volatility smile Options Enron Bankruptcy