General Equilibrium Option Pricing Method: Theoretical and Empirical Study [electronic resource] /
Chen, Jian.author.
This book mainly addresses the general equilibrium asset pricing method in two aspects: option pricing and variance risk premium. First, volatility smile and smirk is the famous puzzle in option pricing. Different from no arbitrage method, this book applies the general equilibrium approach in explaining the puzzle. In the presence of jump, investors impose more weights on the jump risk than the volatility risk, and as a result, investors require more jump risk premium which generates a pronounced volatility smirk. Second, based on the general equilibrium framework, this book proposes variance risk premium and empirically tests its predictive power for international stock market returns.
Chapter1.Introduction -- Chapter2.General Equilibrium Option Pricing Models -- Chapter3.Simulation Comparison -- Chapter4.Empirical Comparison -- Chapter5.Fanning Preference and Option Pricing -- Chapter6.Jump Size Distribution and Option Pricing -- Chapter7.Risk Aversion Estimated From Variance Risk Premium.-Chapter8.Predictability of Variance Risk Premium: Hong Kong Evidence -- Chapter9.Predictability of Variance Risk Premium:Other International Evidence -- Chapter10.Predictability of Variance Risk Premium:A Comparison Study -- Chapter11.Conclusions.
This book mainly addresses the general equilibrium asset pricing method in two aspects: option pricing and variance risk premium. First, volatility smile and smirk is the famous puzzle in option pricing. Different from no arbitrage method, this book applies the general equilibrium approach in explaining the puzzle. In the presence of jump, investors impose more weights on the jump risk than the volatility risk, and as a result, investors require more jump risk premium which generates a pronounced volatility smirk. Second, based on the general equilibrium framework, this book proposes variance risk premium and empirically tests its predictive power for international stock market returns.
Finance, Public.
Macroeconomics.
Economic theory.
Public Finance.
Macroeconomics/Monetary Economics//Financial Economics.
Economic Theory/Quantitative Economics/Mathematical Methods.