This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it...

It is often difficult to distinguish among different option pricing models that consider stochastic volatility and/or jumps based on a cross-section of European option prices. This can result in model misspecification. We analyze the hedging error induced by model misspecification and show that...

This paper examines continuous-time models for the S&P 100 index and its constituents. We find that the jump process of the typical stock looks significantly different than that of the index. Most importantly, the average size of a jumps in the returns of the typical stock is positive, while it...