This paper presents a firm-specific methodology for extracting implied default intensities and recovery rates jointly from unit recovery claim prices---backed by out-of-the-money put options---and credit default swap premiums, therefore providing time-varying and market-consistent views of...

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...

We propose the option realized variance as an observable variable to summarize information from high-frequency option data. This variable aggregates intraday option returns from midquote prices to compute the option's total variability for a given day. Using the S&P 500 index time series and...

We adopt a flexible filtering procedure to extract information from high-frequency data. Specifically, we provide a parsimonious framework to integrate realized measures from high frequency index and derivative prices. In a simulation study, we document the incremental information offered by...

Generally, the semiclosed-form option pricing formula for complex financial models depends on unobservable factors such as stochastic volatility and jump intensity. A popular practice is to use an estimate of these latent factors to compute the option price. However, in many situations, this...