Jump and variance risk premia in the S&P 500

Neumann, M., Prokopczuk, M. and Simen, C. W. (2016) Jump and variance risk premia in the S&P 500. Journal of Banking and Finance, 69. pp. 72-83. ISSN 0378-4266 doi: 10.1016/j.jbankfin.2016.03.013

Abstract/Summary

We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time-series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63 % of these variations.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/62981
Identification Number/DOI	10.1016/j.jbankfin.2016.03.013
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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