Kaeck, Andreas (2013) Asymmetry in the jump-size distribution of the S&P 500: evidence from equity and option markets. Journal of Economic Dynamics and Control, 37 (9). pp. 1872-1888. ISSN 0165-1889

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Abstract

This paper studies alternative distributions for the size of price jumps in the S&P 500 index. We introduce a range of new jump-diffusion models and extend popular double-jump specifications that have become ubiquitous in the finance literature. The dynamic properties of these models are tested on both a long time series of S&P 500 returns and a large sample of European vanilla option prices. We discuss the in- and out-of-sample option pricing performance and provide detailed evidence of jump risk premia. Models with double-gamma jump size distributions are found to outperform benchmark models with normally distributed jump sizes.

Item Type:	Article
Schools and Departments:	School of Business, Management and Economics > Economics
Subjects:	H Social Sciences > HB Economic theory. Demography
Depositing User:	Catrina Hey
Date Deposited:	09 Sep 2013 15:48
Last Modified:	09 Sep 2013 15:48
URI:	http://srodev.sussex.ac.uk/id/eprint/45349

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