The jump-risk premia implicit in options: evidence from an integrated time-series study

The jump-risk premia implicit in options: evidence from an integrated time-series study This paper examines the joint time series of the S&P 500 index and near-the-money short-dated option prices with an arbitrage-free model, capturing both stochastic volatility and jumps. Jump-risk premia uncovered from the joint data respond quickly to market volatility, becoming more prominent during volatile markets. This form of jump-risk premia is important not only in reconciling the dynamics implied by the joint data, but also in explaining the volatility “smirks” of cross-sectional options data. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

The jump-risk premia implicit in options: evidence from an integrated time-series study

Journal of Financial Economics, Volume 63 (1) – Jan 1, 2002

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Publisher
Elsevier
Copyright
Copyright © 2002 Elsevier Science S.A.
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(01)00088-5
Publisher site
See Article on Publisher Site

Abstract

This paper examines the joint time series of the S&P 500 index and near-the-money short-dated option prices with an arbitrage-free model, capturing both stochastic volatility and jumps. Jump-risk premia uncovered from the joint data respond quickly to market volatility, becoming more prominent during volatile markets. This form of jump-risk premia is important not only in reconciling the dynamics implied by the joint data, but also in explaining the volatility “smirks” of cross-sectional options data.

Journal

Journal of Financial EconomicsElsevier

Published: Jan 1, 2002

References

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