Dark Matter in (Volatility and) Equity Option Risk Premiums

References

• Aït-Sahalia Y (2004) Disentangling diffusion from jumps. J. Financial Econom. 74(3):487–528.Crossref, Google Scholar
• Aït-Sahalia Y, Jacod J (2012) Analyzing the spectrum of asset returns: Jump and volatility components in high frequency data. J. Econometrics 50(4):1007–1050.Google Scholar
• Aït-Sahalia Y, Karaman M, Mancini L (2020) The term structure of variance swaps and risk premia. J. Econometrics 219(2):204–230.Crossref, Google Scholar
• Andersen T, Fusari N, Todorov V (2015) The risk premia embedded in index options. J. Financial Econom. 117(3):558–584.Crossref, Google Scholar
• Andersen T, Fusari N, Todorov V (2017) Short-term market risks implied by weekly options. J. Finance 72(3):1336–1386.Crossref, Google Scholar
• Andersen T, Bollerslev T, Diebold F, Labys P (2003) Modeling and forecasting realized volatility. Econometrica 71(2):579–625.Crossref, Google Scholar
• Bakshi G, Cao C, Chen Z (1997) Empirical performance of alternative option pricing models. J. Finance 52(5):2003–2049.Crossref, Google Scholar
• Bakshi G, Madan D, Panayotov G (2010) Returns of claims on the upside and the viability of U-shaped pricing kernels. J. Financial Econom. 97(1):130–154.Crossref, Google Scholar
• Bates D (2000) Post-’87 crash fears in the S&P 500 futures option market. J. Econometrics 94(1/2):181–238.Crossref, Google Scholar
• Bollerslev T, Todorov V (2011) Tails, fears and risk premia. J. Finance 66(6):2165–2211.Crossref, Google Scholar
• Bollerslev T, Todorov V, Xu L (2015) Tail risk premia and return predictability. J. Financial Econom. 118(1):113–134.Crossref, Google Scholar
• Broadie M, Chernov M, Johannes M (2007) Specification and risk premiums: The information in S&P 500 futures options. J. Finance 62(3):1453–1490.Crossref, Google Scholar
• Broadie M, Chernov M, Johannes M (2009) Understanding index option returns. Rev. Financial Stud. 22(11):4493–4529.Crossref, Google Scholar
• Cai N, Kou S (2011) Option pricing under a mixed-exponential jump diffusion model. Management Sci. 57(11):2067–2081.Link, Google Scholar
• Carr P, Wu L (2003) What type of process underlies options? A simple robust test. J. Finance 58(6):2581–2610.Crossref, Google Scholar
• Carr P, Wu L (2016) Analyzing volatility risk and risk premium in option contracts: A new theory. J. Financial Econom. 120(1):1–20.Crossref, Google Scholar
• Chicago Board Options Exchange (2000) Margin Manual (Mimeo).Google Scholar
• Chen H, Dou W, Kogan L (2022) Measuring “dark matter” in asset pricing models. J. Finance Forthcoming.Google Scholar
• Cheng X, Dou W, Liao Z (2022) Macro-finance decoupling: Robust evaluations of macro asset pricing models. Econometrica 90(2):685–713.Crossref, Google Scholar
• Christoffersen P, Heston S, Jacobs K (2013) Capturing option anomalies with a variance-dependent pricing kernel. Rev. Financial Stud. 26(8):1963–2006.Crossref, Google Scholar
• Christoffersen P, Goyenko R, Jacobs K, Karoui M (2018) Illiquidity premia in the equity options market. Rev. Financial Stud. 31(3):811–851.Crossref, Google Scholar
• Coval J, Shumway T (2001) Expected option returns. J. Finance 56(3):983–1009.Crossref, Google Scholar
• Duffie D, Pan J, Singleton K (2000) Transform analysis and asset pricing for affine jump diffusions. Econometrica 68(6):1343–1376.Crossref, Google Scholar
• Eraker B (2004) Do stock prices and volatility jump? Reconciling evidence from spot and option prices. J. Finance 59(3):1367–1404.Crossref, Google Scholar
• Eraker B, Wu Y (2017) Explaining the negative returns to volatility claims: An equilibrium approach. J. Financial Econom. 125(1):72–98.Crossref, Google Scholar
• Eraker B, Johannes M, Polson N (2003) The impact of jumps in equity index volatility and returns. J. Finance 58(3):1269–1300.Crossref, Google Scholar
• Jones C (2006) A nonlinear factor analysis of S&P 500 index option returns. J. Finance 61(5):2325–2363.Crossref, Google Scholar
• Kou S (2002) A jump-diffusion model for option pricing. Management Sci. 48(8):1086–1101.Link, Google Scholar
• Kou S, Wang H (2004) Option pricing under a double exponential jump diffusion model. Management Sci. 50(9):1178–1192.Link, Google Scholar
• Merton R (1976) Option pricing when underlying stock returns are discontinuous. J. Financial Econom. 3(1):125–144.Crossref, Google Scholar
• Muravyev D, Pearson N (2020) Options trading costs are lower than you think. Rev. Financial Stud. 33(11):4973–5014.Crossref, Google Scholar
• Newey W, West K (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55(3):703–708.Crossref, Google Scholar
• Pan J (2002) The jump-risk premia implicit in options: Evidence from an integrated time-series study. J. Financial Econom. 63(1):3–50.Crossref, Google Scholar
• Protter P (2013) Stochastic Integration and Differential Equations (Springer, Berlin).Google Scholar
• Todorov V, Tauchen G (2011) Volatility jumps. J. Bus. Econom. Statist. 29(3):356–371.Crossref, Google Scholar