Arbeitspapier
Variance swap premium under stochastic volatility and self-exciting jumps
We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic triggered by big negative stock returns. The stochastic variance and jump intensity, and their risk premium are estimated jointly from daily stock returns and option data over 2007-2010. The model is calibrated to cumulants implied from option prices instead of option prices directly. We find evidence that the time varying jump intensity plays a very important role in the sub-prime crisis and explained most of the risk premium, while in other calmer periods, stochastic variance accounts for most of the risk premium.
- Language
-
Englisch
- Bibliographic citation
-
Series: Manchester Business School Working Paper ; No. 634
- Classification
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
- Subject
-
Hawkes process
Volatility Surface
Volatility Risk Premium
Jump Risk Premium
Skew Premium
- Event
-
Geistige Schöpfung
- (who)
-
Chen, Ke
Poon, Ser-Huang
- Event
-
Veröffentlichung
- (who)
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The University of Manchester, Manchester Business School
- (where)
-
Manchester
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Chen, Ke
- Poon, Ser-Huang
- The University of Manchester, Manchester Business School
Time of origin
- 2013
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