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Does Oil and Gold Price Uncertainty Matter for the Stock Market?

Bams, Dennis - 2018

We proxy uncertainty in the stock, oil and gold markets with the variance risk premia, extracted from futures and option contracts. We observe that an independent increase in the stock, oil or gold markets uncertainty coincides with negative returns in different industries. However, only the...

Persistent link: https://www.econbiz.de/10012936739

Risk Premia and the VIX Term Structure

Johnson, Travis L. - 2018

The shape of the VIX term structure conveys information about the price of variance risk rather than expected changes in the VIX, a rejection of the expectations hypothesis. A single principal component, Slope, summarizes nearly all this information, predicting the excess returns of S&P 500...

Persistent link: https://www.econbiz.de/10012937549

Do Idiosyncratic Jumps Matter?

Kapadia, Nishad - 2017

We show that idiosyncratic jumps are a key determinant of mean stock returns from both an ex post and ex ante perspective. Ex post, the entire annual average return of a typical stock accrues on the four days on which its stock price jumps. Ex ante, idiosyncratic jump risk earns a premium: a...

Persistent link: https://www.econbiz.de/10012967984

The Zero Lower Bound and Economic Determinants of the Volatility Surface in the Interest Cap Markets

Kim, Myeong Hyeon - 2017

We address an important yet unanswered question: What would be the economic determinants of the implied volatility … during the zero lower bound periods? To answer this question, we examine time variations of the cap market implied volatility … and investigate economic determinants on slopes and curvatures of the implied volatility curves. We ﬁnd that unexpected …

Persistent link: https://www.econbiz.de/10012969150

The Factor Structure in Equity Options

Christoffersen, Peter - 2016

Equity options display a strong factor structure. The first principal components of the equity volatility levels, skews … components are highly correlated with the S&P500 index option volatility, skew, and term structure respectively. We develop an …

Persistent link: https://www.econbiz.de/10013007655

First-Passage Probability, Jump Models and Intra-Horizon Risk

Bakshi, Gurdip - 2016

This paper proposes a risk measure, based on first-passage probability, which reflects intra-horizon risk in jump models with finite or infinite jump activity. Our empirical investigation shows, first, that the proposed risk measure consistently exceeds the benchmark Value-at-Risk (VaR). Second,...

Persistent link: https://www.econbiz.de/10013008970

Time-changed Lévy processes and option pricing : a critical comment

Fallahgoul, Hasan - 2020

Carr and Wu (2004), henceforth CW, developed a framework that encompasses almost all of the continuous-time models proposed in the option pricing literature. Their framework hinges on the stopping time property of the time changes. By ana- lyzing the measurability of the time changes with...

Persistent link: https://www.econbiz.de/10012851667

Assessing Models of Individual Equity Option Prices

Bakshi, Gurdip - 2020

This article investigates option models in the encompassing class of stochastic volatility, return-jumps, and … volatility-jumps. Relying on individual equity options on the 50 most active firms and maximum likelihood estimation method, we … obtain several findings. First, while stochastic volatility is as important for individual equity options as it is for index …

Persistent link: https://www.econbiz.de/10012857280

Broker-Dealer Risk Appetite and Commodity Returns

Etula, Erkko - 2020

This paper shows that the risk-bearing capacity of U.S. securities brokers and dealers is a strong determinant of risk premia in commodity markets. Commodity derivatives are the principal instrument used by producers and consumers of commodities to hedge against commodity price risk....

Persistent link: https://www.econbiz.de/10012857609

Jumps in Option Prices and Their Determinants : Real-Time Evidence From the E-Mini S&P 500 Options Market

Kapetanios, George - 2019

We provide first-time evidence of the real-time characteristics and drivers of jumps in option prices. To this end, we employ high-frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are...

Persistent link: https://www.econbiz.de/10012859159