Miao, Jianjun; Wei, Bin; Zhou, Hao - Department of Economics, Boston University - 2012
This paper offers an ambiguity-based interpretation of variance premium - the differ- ence between risk-neutral and … regarding the uncertain economic regimes. Our approach endogenously generates variance premium without impos- ing exogenous … stochastic volatility or jumps in consumption process. Such a framework can reasonably match the mean variance premium as well as …