Bingxin Li

• Doctor of Philosophy
• Professor (Associate) at West Virginia University

This paper proposes an approximate closed-form option-pricing model based on a non-linear GARCH process with Normal Inverse Gaussian (NIG) Lévy innovations. We develop the mathematical framework and demonstrate how to obtain a closed-form solution to the option price when the return dynamics are characterized by NIG innovations for volatility that...

In this article, we propose a new theoretical approach for developing hedging strategies based on swap variance ( SwV ). SwV is a generalized risk measure equivalent to a polynomial combination of all moments of a return distribution. Using the S&P 500 index and West Texas Intermediate (WTI) crude oil spot and futures price data, as well as simulat...

The impressive conversational and programming abilities of ChatGPT make it an attractive tool for facilitating the education of bioinformatics data analysis for beginners. In this study, we proposed an iterative model to fine-tune instructions for guiding a chatbot in generating code for bioinformatics data analysis tasks. We demonstrated the feasi...

Natural language processing (NLP) technologies, such as ChatGPT, are revolutionizing various fields, including finance research. This article explores the multifaceted potential of ChatGPT as a transformative tool for finance researchers, highlighting the benefits, challenges, and novel insights it can offer to facilitate the research. We demonstra...

The impressive conversational and programming abilities of ChatGPT make it an attractive tool for facilitating the education of bioinformatics data analysis for beginners. In this study, we proposed an iterative model to fine-tune instructions for guiding a ChatGPT in generating code for bioinformatics data analysis tasks. We demonstrated the feasi...

This paper provides evidence that the trade secrets protection increases stock price crash risk. Using a quasi-experimental setting with the Uniform Trade Secrets Act (UTSA), we find that firms headquartered in states adopting the UTSA tend to have higher stock price crash risk. The results are robust to controlling for other trade secrets laws and...

We study energy futures option returns for crude oil, natural gas, heating oil, and gasoline. Average call and put returns are negative at short maturities, more so for OTM options, and increase with maturity. Put returns are less negative than call returns, but this is not the case for delta-hedged returns, indicating that the aggregate risk of th...

This paper studies the spread of Brent-WTI futures prices using a no-arbitrage term structure model with one common and two latent idiosyncratic risk factors. We document more negative risk premia for WTI than for Brent, and the differences are more pronounced at longer maturities. The expectation of future spot price dominates the risk premium in...

This paper studies how volatility affects the risk premium in crude oil futures through a discrete-time term structure model with long-run and short-run GARCH-type volatility components. Estimated using WTI crude oil futures data from January 1990 to July 2016, our model simultaneously matches futures prices and volatilities for the nearest twelve...

We investigate the interplay between energy prices and drilling activities in the United States and how this relationship has evolved due to the shale revolution. We hypothesize (1) there exists significant information spillover between drilling activities and energy prices; (2) the amount of information transmitted between drilling activities and...

The VIX index is not only a volatility index but also a polynomial combination of all possible higher moments in market return distribution under the risk-neutral measure. This paper formulates the VIX as a linear decomposition of four fundamentally different elements: the realized variance (RV), the variance risk premium (VRP), the realized tail (...

One crucial task of option price modeling is to estimate latent state variables. This paper emphasizes the importance of incorporating option implied information to update latent state variables and sheds light on numerical developments to alleviate the cumbersome estimation process in option valuation. We propose a simple option-implied approximat...

The conditional CAPM suggests that the market beta and market risk premium should vary over time. In this paper, we provide evidence that the size and value premiums are also state dependent. We develop a joint Markov regime-switching model for the CAPM and the VIX index to study the regime variation of CAPM parameters and to investigate the regime...

Growth in the natural gas market is pronounced since the shale gas boom. Natural gas has become increasingly important in international trade, especially after the recent financialization in commodity markets. Motivated by the high volatility and time-varying nature in natural gas futures prices, understanding the pricing dynamics of natural gas is...

Speculative activity in commodity markets has increased dramatically since 2002. This paper investigates how aggregate risk aversion and risk premiums in the crude oil market covary with the level of speculation. Using crude oil futures and option data, we estimate aggregate risk aversion in the crude oil market and find that it is significantly lo...

Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and dynamic jump intensities in these markets. Allowing for...

This paper estimates equity tail risk premia (TRP) by decomposing the squared VIX index into four fundamentally different elements: the tail risk premium (TRP), the realized tail (RT), the variance risk premium (VRP) and the realized variance (RV), respectively. Empirically, approximate one-third of the VIX variation is attributed to the TRP. In ad...