Britten-Jones and Neuberger (2000) derived a model-free implied volatility under the diffusion assumption. In this article, we extend their model-free implied volatility to asset price processes with jumps and develop a simple method for implementing it using observed option prices. In addition,...

Existing research examines the impact of volatility shocks on the relative pricing of long-term vs. short-term options and documents patterns of short-horizon underreaction and long-horizon overreaction in the options market. These studies, however, rely on implied volatilities derived from...