hedge the risk using positions in the market for options on a related asset and the option is then priced at the cost of …

We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the …

out some key issues on how the credit risk associated to these products can be reduced and, finally, in the last section …

index time series and options data, we extract volatility risk and risk premium from the volatility surfaces, and find that … the extracted risk premium significantly predicts future stock returns …

This paper proposes a linear option pricing model by imposing common market pricing on decentralized risk exposure … breakeven contribution of each risk source. A cross-sectional regression of the options time decay on the risk estimates … options time decay. The common pricing estimate captures the pricing deviation of the risk source from its breakeven …

variations. We show that a hedged portfolio sorted on idiosyncratic diffusive risk yields a weekly return of -2.16%, suggesting … the existence of a low idiosyncratic risk anomaly. Subsequently, we examine possible explanations for this anomaly, and …