that it generalizes standard stochastic volatility models by allowing for "jumps"" and other fat-tailed negative movements … in stock returns. The empirical results therefore also demonstrate the importance of jumps for the pricing of out …

Realized variance can be broken down into continuous volatility and jumps. We show that these two components have very … medium to long-term risk-return relationships, jumps do not predict future medium- to long-term excess returns. We use …