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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

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To link to this item 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
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:62981
Publisher:Elsevier

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