We propose a novel factor model for option returns. Option exposures are estimated nonparametrically and factor risk … option return dynamics. Using index options, we characterize the conditional risk premia for the market return, market … variance, and tail and intermediary risk factors. All average risk premia have the expected sign and meaningful magnitudes …

difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain …

Volatility and Stochastic Interest rates. In this paper, we examine the combine effect of a Heston-type model for the underlying … see that stochastic volatility and stochastic interest rates have an impact on the resulting fair value of the contract … and the resulting fair fee as well as mainly on the vega hedge. Interestingly, using a stochastic volatility model leads …

used to derive a measure of the volatility of interest rate and also that of the Prices. This is achieved by exploiting the …

factors such as jump and volatility risks, short-sale constraints, and stock lottery characteristics. It is also inconsistent …

We examine the pricing of volatility risk in the cross-section of equity Real Estate Investment Trust (REIT) stock …) volatility. In contrast to the negative and significant price of systematic volatility risk for Non-REIT equities, we find that …. Within the total volatility risk profile, idiosyncratic volatility dominates aggregate volatility in REIT pricing …

almost half of the implied volatility skew can be explained by the skew risk premium. We provide evidence that skew and …We measure the skew risk premium in the equity index market through the skew swap. We argue that just as variance swaps … skew swaps be used to explore the relationship between the skew in implied volatility and realized skew. Like the variance …

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, jump risk tends to amplify intra-horizon risk. Third, we find large …

volatility terms. We derive theoretically the underlying assets' risk-neutral distributions, and we estimate the parameters of … idiosyncratic volatility risk, which turns out to be significantly different from zero for all the stocks in our sample. We … which idiosyncratic volatility is allowed to be priced. We model the index dynamics' physical distribution as a mean …

We work in the Uncertain Volatility Model setting of Avellaneda, Levy, Paras [1] and Lyons [10] (cf. also [11]). We … first look at European options in a market with no interest rate and focus on theextreme case where the volatility has a … volatility given by the lower bound) of an option with payoff the smallest concave function above the initial payoff. We next …