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The Factor Structure in Equity Options
Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris - School of Economics and Management, University of Aarhus - 2013
Principal component analysis of equity options on Dow-Jones firms reveals a strong factor structure. The first principal component explains 77% of the variation in the equity volatility level, 77% of the variation in the equity option skew, and 60% of the implied volatility term structure across...
Persistent link: https://www.econbiz.de/10010851218
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The Importance of the Loss Function in Option Valuation
Christoffersen, Peter; Jacobs, Kris - Centre Interuniversitaire de Recherche en Analyse des … - 2003
. First, for any given model, the loss function used in parameter estimation and model evaluation should be the same … utilisée pour l'estimation et l'évaluation des modèles de valorisation des options? Plusieurs fonctions ont été suggérées, mais … utilisée dans l'estimation des paramètres et dans l'évaluation du modèle devrait être la même, sinon on obtient des estimations …
Persistent link: https://www.econbiz.de/10005100937
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Dynamic jump intensities and risk premiums in crude oil futures and options markets
Christoffersen, Peter F.; Jacobs, Kris; Li, Bingxin - 2016
Options on crude oil futures are the most actively traded commodity options. We develop a class of computationally efficient discrete-time jump models that allow for closed-form option valuation, and we use crude oil futures and options data to investigate the economic importance of jumps and...
Persistent link: https://www.econbiz.de/10011646275
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The State Price Density Implied by Crude Oil Futures and Option Prices
Christoffersen, Peter - 2020
Both large oil price increases and decreases are associated with deteriorating economic conditions. Consistent with this stylized fact, we find that the projection of the state price density (SPD) on oil returns estimated from oil futures and option prices displays a U-shaped pattern. Because...
Persistent link: https://www.econbiz.de/10012857335
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The Role of Intermediaries in Derivatives Markets : Evidence from VIX Options
Jacobs, Kris - 2020
Consistent with models in which intermediaries absorb net demand pressure from end-users and respond by changing prices, net option demand is positively related to option prices in the market for VIX puts and VIX calls. These findings are consistent with existing results for S&P 500 index (SPX)...
Persistent link: https://www.econbiz.de/10012830120
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Characterizing the Variance Risk Premium : The Role of the Leverage Effect
Hu, Guanglian - 2019
A substantial portion of the variation in the market variance risk premium can be explained by the conditional covariance between the market return and its variance, which we refer to as the leverage effect. This finding holds at different data frequencies and for various sample periods, and it...
Persistent link: https://www.econbiz.de/10012898570
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Option-Based Estimation of the Price of Co-Skewness and Co-Kurtosis Risk
Christoffersen, Peter - 2017
We show that the prices of risk for factors that are nonlinear in the market return are readily obtained using index option prices. The price of co-skewness risk corresponds to the market variance risk premium, and the price of co-kurtosis risk corresponds to the market skewness risk premium....
Persistent link: https://www.econbiz.de/10012971095
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The Factor Structure in Equity Options
Christoffersen, Peter - 2016
Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews, and term structures explain a substantial fraction of the cross-sectional variation. Furthermore, these principal components are highly correlated with the S&P500 index option...
Persistent link: https://www.econbiz.de/10013007655
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A Tractable Framework for Option Pricing with Dynamic Market Maker Inventory and Wealth
Fournier, Mathieu - 2018
We develop a tractable dynamic model of an index option market maker with limited capital and characterize how option prices depend on inventory risk and market maker wealth. The risk averse market maker absorbs positive demand by end users and requires a more negative variance risk premium when...
Persistent link: https://www.econbiz.de/10012938291
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Supply, Demand, and Risk Premiums in Electricity Markets
Jacobs, Kris - 2017
We model the impact of supply and demand on risk premiums in electricity futures, using daily data for 2003-2014. The model provides a satisfactory fit and allows for unspanned economic risk not embedded in the futures price. The spot risk premium and forward bias implied by the model are on...
Persistent link: https://www.econbiz.de/10012944078