Option prices in a model with stochastic disaster risk
Contrary to well-known asset pricing models, volatilities implied by equity index options exceed realized stock market volatility and exhibit a pattern known as the volatility skew. We explain both facts using a model that can also account for the mean and volatility of equity returns. Our model ass...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
INFORMS Inst.for Operations Res.and the Management Sciences
2019
|
| Subjects: | |
| Online Access: | View Fulltext in Publisher |