UCLA Recent Work Title Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S & amp ; P 500 Options Permalink

@inproceedings{SantaClaraUCLARW,
  title={UCLA Recent Work Title Jump and Volatility Risk and Risk Premia : A New Model and Lessons from S & amp ; P 500 Options Permalink},
  author={Pedro Santa-Clara and Shu Yan and Michael Brennan and Mikhail Chernov and Jun Liu and Francis A. Longstaff}
}
We use a novel pricing model to filter times series of diffusive volatility and jump intensity from S&P 500 index options. These two measures capture the ex-ante risk assessed by investors. We find that both components of risk vary substantially over time, are quite persistent, and correlate with each other and with the stock index. Using a simple general equilibrium model with a representative investor, we translate the filtered measures of ex-ante risk into an ex-ante risk premium. We find… CONTINUE READING

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