General Equilibrium Option Pricing Method: Theoretical and Empirical Study

Business & Finance, Economics, Public Finance, Macroeconomics
Cover of the book General Equilibrium Option Pricing Method: Theoretical and Empirical Study by Jian Chen, Springer Singapore
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Author: Jian Chen ISBN: 9789811074288
Publisher: Springer Singapore Publication: April 10, 2018
Imprint: Springer Language: English
Author: Jian Chen
ISBN: 9789811074288
Publisher: Springer Singapore
Publication: April 10, 2018
Imprint: Springer
Language: English

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.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

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.

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