Review of Quantitative Finance and Accounting

, Volume 27, Issue 4, pp 365–382

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

  • Bruce Mizrach
Article

Abstract

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.

Keywords

Volatility smile Options Enron Bankruptcy 

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Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  • Bruce Mizrach
    • 1
  1. 1.Department of EconomicsRutgers UniversityNew Brunswick

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