“The equity risk premium has been studied for decades, almost always estimated ex-post from realized returns. This book makes a careful case for an ex-ante view instead, reading the ERP directly out of the option prices the market quotes today.

Building from first principles through probability, utility, and risk-neutral pricing, Lewis develops a framework that is mathematically rigorous yet unusually clear, and the empirical chapters give a practical path to implementing these models yourself. By tying the ERP to tradable, forward-looking derivative markets, this book reveals information about risk and return that historical data simply cannot provide. It opens up an entirely new way of analyzing and managing the ERP and is, in my view, a game changer for the field.”

• Thijs van den Berg, Head of AI and Quantitative Research, Shell Asset Management

“This book brings all the sophistication of modern option pricing theory to bear on the classical problem of estimating the Equity Risk Premium. The proposed Option-based Asset Pricing (OBAP) theory provides an objective and timely ERP estimation, which is fully forward looking – a definite advantage in this rapidly changing world. This is certain to become a classical treatment, and should be of interest to both investment theory academics and practitioners. Highly recommended.”

• Dan Pirjol, Industry Professor, Stevens Institute of Technology