The paper undertakes a non-parametric analysis of the very high frequency movements in stock market volatility using very finely sampled data on the Samp;P VIX index compiled by the CBOE. The data suggest that stock market volatility is best described as a pure jump process without a continuous...

Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able to explain a non-trivial fraction of...

In this paper we study risk-neutral densities (RNDs) for the German stock market. The use of option prices allows us to quantify the risk-neutral probabilities of various levels of the DAX index. For the period from December 1995 to November 2001, we implement the mixture of log-normals model...

In this paper we study risk-neutral densities (RNDs) for the German stock market. The use of option prices allows us to quantify the risk-neutral probabilities of various levels of the DAX index. For the period from December 1995 to November 2001, we implement the mixture of log-normals and a...

In this paper we propose a proxy for the implied volatility of OTC equity derivatives. Our methodology rests on two pillars: (1) we exploit the information embedded in the price of the underlying asset by combining two measures of price volatility (2) we pool the stocks by sector in order to...

Stock market volatility clusters in time, carries a risk premium, is fractionally integrated, and exhibits asymmetric leverage effects relative to returns. This paper develops a first internally consistent equilibrium based explanation for these longstanding empirical facts. The model is cast in...

This article analyzes the issue of American option valuation when the underlying exhibits a GARCH-type volatility process. We propose the usage of Rubinstein's Edgeworth binomial tree (EBT) in contrast to simulation-based methods being considered in previous studies. The EBT-based valuation...

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the...

The paper undertakes a non-parametric analysis of the very high frequency movements in stock market volatility using very finely sampled data on the S&P VIX index compiled by the CBOE. The data suggest that stock market volatility is best described as a pure jump process without a continuous...

In this paper, I show that the variance of Fama-French factors, the variance of the momentum factor, as well as the correlation between these factors, predict an important fraction of the time- series variation in post-1990 aggregate stock market returns. This predictability is particularly...