Jump and variance risk premia in the S&P 500

Maximilian Neumann; Marcel Prokopczuk; Chardin Wese Simen

doi:10.1016/j.jbankfin.2016.03.013

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Journal of Banking & Finance Vol. 69 2016

Jump and variance risk premia in the S&P 500

Maximilian Neumann¹; Marcel Prokopczuk^2,3,4; Chardin Wese Simen

¹ Technical University of Munich · ² Leibniz University Hannover · ³ ICMA Centre · ⁴ University of Reading

Abstract

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.

DOI: 10.1016/j.jbankfin.2016.03.013
Volume: 69
Pages: 72-83
Language: en
Sources: openalex crossref bibtex:phds-export.bib

Jump and variance risk premia in the S&P 500

Abstract

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