In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

We introduce a discrete-time model for log-return dynamics with observable volatility and jumps. Our proposal extends … the class of Realized Volatility heterogeneous auto-regressive gamma (HARG) processes adding a jump component with time … compensating for equity, volatility, and jump risks, the generating function under the risk-neutral measure inherits analytical …

one-month variance swap rate, i.e., the CBOE Volatility Index (VIX) accurately. Our research suggests that one should use … premium. Empirical estimation exercises show that the GARCH option-pricing models under our mLRNVR are able to price the SPX …

In recent years there has been a remarkable growth of volatility options. In particular, VIX options are among the most … actively trading contracts at CBOE. These options exhibit upward sloping volatility skew and the shape of the skew is largely … independent of the volatility level. To take into account these stylized facts, this article introduces a novel two …

This paper provides empirical evidence that volatility markets are integrated through the time-varying term structure … of variance risk premia. These risk premia predict the returns from selling volatility for different horizons, maturities … significance from the no-arbitrage prices and bounds implied by the variance swap market. The paper examines these pricing errors …

stochastically correlated default intensities, or multivariate dynamic portfolio choice with volatility and correlation jumps. We … implied volatility skew term structures that are largely unrelated to the level and composition of the spot volatility. This … options. Second, we find that volatility and correlation jumps can imply an economically relevant intertemporal hedging demand …

We develop a novel method to decompose a straddle into a volatility risk portfolio and a jump risk portfolio. The …. We use the straddle decomposition to analyze the volatility risk premium and the jump risk premium embedded in a straddle … volatility risk portfolio persistently generates positive returns during earnings announcement periods …

prices caused by stochastic volatility. -- option pricing ; autoregression ; heteroskedasticity ; GARCH ; leverage effect …

This paper studies the information content of the S&P 500 and VIX markets on the volatility of the S&P 500 returns. We … risk-neutral distributions as well as the term structure of volatility smiles and of variance risk premia. We find that the …