the derivation of a unique variance risk premium and price of volatility risk based only on the underlying return and … volatility risk prices yield in option values in comparison to prices extracted from observed option market data. We also present … volatility dynamics for a wide class of stochastic volatility (SV) models. The SD approach also derives under similar conditions …

The fair value of an option is given by breakeven volatility, the value of implied volatility that sets the profit and … loss of a delta-hedged option to zero. We calculate breakeven volatility for 400,000 options traded on the S&P 500 Index …, and we build a predictive model for these volatility values. A two-stage regression approach captures the majority of …

. Using option-implied correlation does not improve any of the metrics. Using option-implied volatility, risk-premium, and …Our objective in this paper is to examine whether one can use option-implied information to improve the selection of … mean-variance portfolios with a large number of stocks, and to document which aspects of option-implied information are …

's risk neutral probability density (RND) over the underlying price at expiration. The RND contains investors' beliefs about … the true probabilities blended with their risk preferences, both of which are of great interest to academics and … distill true expectations and risk premia from observed RNDs. I touch on areas of active current research including the …

portfolio. The results reveal that market default risk is positively (negatively) related to the index risk-neutral volatility …This paper examines the time series economic determinants of Standard & Poor's (S&P) 500 Index option-implied risk … computed by aggregating daily default risk measures for all individual, non-financial firms included in the S&P 500 Index …

developed which completely characterizes all risk arbitrage opportunities which arise if a well-behaved pricing kernel does not …

Measures of model risk based on the residual error from hedging in a misspecified model were recently proposed in … model risk for the original market. If the market can not be completed, as it is the case in most market models that allow … for jumps, we derive measures that are applicable in a more general setup. In a case study we measure the model risk that …

market prices of risk of hedging assets, a robust approach leads to a reduction or even elimination of a speculative … component in good-deal hedging, which is shown to be equivalent to a global risk-minimization in the sense of Föllmer and …