Consumption risks in option returns
نویسندگان
چکیده
We offer evidence that exposures to consumption growth and volatility are significantly priced in the cross-section of delta-hedged option returns. Consumption commands a positive risk premium, whereas negative premium. Our results suggest provide rational foundations for well-known relations between options moneyness or idiosyncratic underlying-stock Furthermore, those premiums can also price stocks. In representative-agent economy with recursive preferences, our investors prefer early resolution uncertainty.
منابع مشابه
Short-run and Long-run Consumption Risks, Dividend Processes and Asset Returns
We examine the implications of shortand long-run consumption growth fluctuations on the momentum and contrarian profits and the value premium in a unified economic framework. By allowing time-varying firm cash flow exposures to the short-run and long-run shocks in consumption growth, we find the otherwise standard intertemporal asset pricing model goes a long way in generating the momentum and ...
متن کاملOption Valuation with Jumps in Returns and Volatility
We price options when there are jumps in the pricing kernel and correlated jumps in returns and volatilities. A limiting case of our GARCH process consists of a model where both asset returns and local volatility follow jump diffusion processes with correlated jump sizes. When the jump processes are shut down our model reduces to Duan’s (1995) GARCH option model; when the stochastic volatility ...
متن کاملsecuritization of mortality risks in life annuities
insurers have in the past few decades faced longevity risks - the risk that annuitants survive more than expected - and therefore need a new approach to manage this new risk. in this dissertation we survey methods that hedge longevity risks. these methods use securitization to manage risk, so using modern financial and insurance pricing models, especially wang transform and actuarial concepts, ...
15 صفحه اولConsumption, Aggregate Wealth and Expected Stock Returns
This paper studies the role of detrended wealth in predicting stock returns. We call a transitory movement in wealth one that produces a deviation from its shared trend with consumption and labor income. Using U.S. quarterly stock market data we find that these trend deviations in wealth are strong predictors of both real stock returns and excess returns over a Treasury bill rate. We also find ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Journal of Empirical Finance
سال: 2022
ISSN: ['0927-5398', '1879-1727']
DOI: https://doi.org/10.1016/j.jempfin.2022.10.001