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Idiosyncratic Jump Risk Matters : Evidence from Equity Returns and Options
Bégin, Jean-François - 2018
The recent literature provides conflicting empirical evidence on the pricing of idiosyncratic risk. This paper sheds new light on the matter by exploiting the richness of option data. First, we find that idiosyncratic risk explains 28% of the variation in the risk premium on a stock. Second, we...
Persistent link: https://www.econbiz.de/10012936071
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Liquidity Risk and Volatility Risk in Credit Spread Models : A Unified Approach
Perrakis, Stylianos - 2017
and volatility risk in the dynamics of asset value in debt rollover models. Using an innovative theoretical approach we … values from empirical studies that volatility risk, together with deteriorating bond market liquidity, decrease both debt and …
Persistent link: https://www.econbiz.de/10012973387
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Option Prices in a Model with Stochastic Disaster Risk
Seo, Sang Byung - 2020
volatility and exhibit a pattern known as the volatility skew. We explain both facts using a model that can also account for the … mean and volatility of equity returns. Our model assumes a small risk of economic disaster that is calibrated based on … to the model's ability both to match equity volatility and to reconcile option prices with macroeconomic data on disaster …
Persistent link: https://www.econbiz.de/10012856361
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Time-Varying Uncertainty and Jump Intensities : Why Should Variance Jumps Be Different?
Kraftschik, Alexander - 2017
uncertainty of the underlying. Transferring this intuition to volatility jumps requires that in affine models the variance jump …
Persistent link: https://www.econbiz.de/10012957054
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Beta risk in the cross-section of equities
Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017
We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...
Persistent link: https://www.econbiz.de/10011646407
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The term structure of systematic and idiosyncratic risk
Hollstein, Fabian; Prokopczuk, Marcel; Wese Simen, Chardin - 2017
We study the term structure of variance (total risk), systematic and idiosyncratic risk. Consistent with the expectations hypothesis, we find that, for the entire market, the slope of the term structure of variance is mainly informative about the path of future variance. Thus, there is little...
Persistent link: https://www.econbiz.de/10011751173
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Pricing of idiosyncratic equity and variance risks
Gourier, Elise - 2016
the variance of idiosyncratic returns. The estimation is performed on a time series of returns and option prices from 2006 …
Persistent link: https://www.econbiz.de/10011410917
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Term structure of interest rates with short-run and long-run risks
Grishchenko, Olesya V.; Song, Zhaogang; Zhou, Hao - In: The Journal of finance and data science : JFDS 8 (2022), pp. 255-295
We find that interest rate variance risk premium (IRVRP) - the difference between implied and realized variances of interest rates - is a strong predictor of U.S. Treasury bond returns of maturities ranging between one and ten years for return horizons up to six months. IRVRP is not subsumed by...
Persistent link: https://www.econbiz.de/10014433708
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Risk Premia in Option Markets
Madan, Dilip B. - 2015
Risk premia are related to price probability ratios or for continuous time pure jump processes the ratios of jump arrival rates under the pricing and physical measures. The variance gamma model is employed to synthesize densities with risk premia seen as the ratio of the three parameters. The...
Persistent link: https://www.econbiz.de/10013018782
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Pricing of Volatility Risk in REITs
DeLisle, Jared - 2013
We examine the pricing of volatility risk in the cross-section of equity Real Estate Investment Trust (REIT) stock … returns over the 1996 – 2010 period. We consider both aggregate (systematic) volatility and firm-specific (idiosyncratic …) volatility. In contrast to the negative and significant price of systematic volatility risk for Non-REIT equities, we find that …
Persistent link: https://www.econbiz.de/10013092294