Abstract

Public option calibration can leave synchronized-stress exposure only partly spanned. This paper turns the remaining compression into a listed-option relative-value rule. The trading coordinate is the wedge between index-implied synchronization and an adapted realized-synchronization benchmark generated from the Volterra-Perron stress state. A positive wedge selects direction; capital enters only through lower-bound sizing. When index options embed more synchronized stress than admissible single-name variance carriers support, the selected book is short index convexity and long carrier-basket convexity under public-neutrality, liquidity, cost, and capital constraints. Five maps separate signal extraction, realized benchmarking, carrier selection, book formation, and sellability sizing; the stress-convexity hedge ratio is a conditional projection of index-stress P&L onto carrier-basket P&L. The 2001-2018 OptionMetrics/Oxford-Man ledger reports 1,496 sign-positive candidate books and 906 allocated rows over 805 active dates. At 1x bid-ask costs the balanced specification reports total execution P&L of 24.567 million, annualized Sharpe 3.958, expected-shortfall loss 23,683, and max drawdown 364,148.

Citation

Vidal Llauradó, Joan. “Synchronized Stress Relative Value: Public-Neutral Option Books under Latent Stress Compression.” 2026. doi:10.2139/ssrn.6731781