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The price of the smile and variance risk premia

Gruber, Peter H.; Tebaldi, Claudio; Trojani, Fabio - 2015 - This version: September 8, 2015

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 downward sloping term structure of low-frequency variance...

Persistent link: https://www.econbiz.de/10011412294

Tails, Fears and Risk Premia

Bollerslev, Tim - 2011

We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof we identify and estimate a new Investor Fears index. The index suggests both large and...

Persistent link: https://www.econbiz.de/10013133667

Tails, Fears and Risk Premia

Bollerslev, Tim - 2009

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Persistent link: https://www.econbiz.de/10013158966

Modeling Conditional Factor Risk Premia Implied by Index Option Returns

Fournier, Mathieu; Jacobs, Kris; Orłowski, Piotr - 2021

We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk premia can vary nonlinearly with states. The model is estimated using regressions, with minimal assumptions on factor and option return dynamics. Using index options, we...

Persistent link: https://www.econbiz.de/10013213854

The fear of rare economic disasters reflected in option prices

Dumitrescu, Ioana; Ivanova, Vesela - In: Essays on general equilibrium models with alternative …, (pp. 85-124). 2016

Persistent link: https://www.econbiz.de/10011647015

Volatility Risk and Stock Return Predictability on Global Financial Crises

Kongsilp, Worawuth - 2016

This paper investigates the role of volatility risk on stock return predictability specified on two global financial crises: the dot-com bubble and recent financial crisis. Using a broad sample of stock options traded at the American Stock Exchange and the Chicago Board Options Exchange (CBOE)...

Persistent link: https://www.econbiz.de/10012999962

Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set

Sala, Carlo; Barone-Adesi, Giovanni - 2015

information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental …

Persistent link: https://www.econbiz.de/10011506352

Aggregate Tail Risk and Expected Returns

Chapman, David A. - 2016

We examine the connection between tail risk — as measured in Kelly and Jiang (2014) — and the cross-section of expected returns. In conditional predictive regression systems and vector-autoregressions of the market portfolio and the long- and shoresides of the Fama-French factor portfolios,...

Persistent link: https://www.econbiz.de/10013005673

Disaster Risks in Bond Returns

Lin, Hai - 2019

We propose a news-implied rare disaster risk indicator and study its predictive power on the returns of U.S. Treasury … not spanned by the current yield curve. The disaster risk factor delivers a counter cycle bond risk premium, and the … predictability of disaster risk is more significant during periods of economic downturn. Our empirical findings show that disaster …

Persistent link: https://www.econbiz.de/10012860176

Extreme inflation and time-varying expected consumption growth

Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian - 2022 - This version: January 3, 2022

alternative derivation for a measure of time-varying disaster risk suggested by Wachter (2013), implying that both the disaster …

Persistent link: https://www.econbiz.de/10012797771

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