When options are traded, one can use their prices and price changes to draw inference about the set of risk factors and their risk premia. We analyze tests for the existence and the sign of the market prices of jump risk that are based on option hedging errors. We derive a closed-form solution...

Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors. When the hedge is performed under the ideal conditions of continuous trading and correct model specification, the sign of the premium is the same as the sign of the mean hedging...

We use the informational content of VIX derivatives to infer implications on the non-affine modeling of the stock returns' variance dynamics. We find that both a non-affine diffusion and variance jumps are necessary to capture the short- and long-term implied volatility distribution. In- and...