Disasters implied by equity index options
Disasters implied by equity index options. David Backus, Mikhail Chernov, Ian Martin. NBER Working Paper No. 15240. Issued in August 2009 26 Oct 2009 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank Michael Brandt, Rodrigo 11 Aug 2010 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank the many people who have Disasters implied by equity index options. D Backus, M Chernov, I Martin. Journal of Finance 66 (6), 1969-2012, 2011. 250, 2011. The term structure of inflation and Martin (2011) study option prices in a consumption disaster model similar to that of equity volatility, and implied volatilities on index options. Option prices
26 Oct 2009 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank Michael Brandt, Rodrigo
Disasters Implied by Equity Index Options 1971 macroeconomic data to one implied by an estimated option-pricing model. A second comparison focuses on option prices. We follow the macro-finance route, using macroeconomic data and the preferences of a representative agent to value options as well as equity, and compare these option prices to We use equity index options to quantify the probability and magnitude of disasters: extreme negative realizations of consumption growth and stock returns. We show that option prices imply smaller probabilities of these extreme outcomes than have been estimated from inter- Disasters Implied by Equity Index Options 1971 macroeconomic data to one implied by an estimated option-pricing model. A second comparison focuses on option prices. We follow the macro-finance route, using macroeconomic data and the preferences of a representative agent to value options as well as equity, and compare these option prices to those of an Disasters implied by equity index options We use prices of equity index options to quantify the impact of extreme events on asset returns. We define extreme events as departures from normality of the log of the pricing kernel and summarize their impact with high-order cumulants: skewness, kurtosis, and so on. with disasters and in a st atistical pricing model esti mated from equity index options. Option prices thus provide inde pendent confirmation of the impact of
CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): We use equity index options to quantify the distribution of consumption growth disasters. The challenge lies in connecting the risk-neutral distribution of equity returns implied by options to the true distribution of consumption growth estimated from macroeconomic data.
We use equity index options to quantify the distribution of consumption growth disasters. The challenge lies in connecting the risk‐neutral distribution of equity returns implied by options to the true distribution of consumption growth. First, we compare pricing kernels constructed from macro‐finance and option‐pricing models.
CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): We use prices of equity index options to quantify the impact of extreme events on asset returns. We define extreme events as departures from normality of the log of the pricing kernel and summarize their impact with high-order cumulants: skewness, kurtosis, and so on.
Disasters implied by equity index options. D Backus, M Chernov, I Martin. Journal of Finance 66 (6), 1969-2012, 2011. 250, 2011. The term structure of inflation and Martin (2011) study option prices in a consumption disaster model similar to that of equity volatility, and implied volatilities on index options. Option prices that p§t is the single factor driving option-implied jump risk measures in the cross equity portfolio with exposure to disasters earns risk-adjusted returns of 7.6% per year. Fi- To develop some intuition now, consider the popular VIX index. (2011) find that option implied probabilities of rare events are smaller than Supplementing the model with a rich data set of international equity index options ,. 28 Apr 2014 Implied volatility–typically, the volatility that is implied in option prices; typically associated with both lower strikes on equity index options and higher strikes on volatility options); Capital markets firms activate disaster plans. distribution of consumption disasters from S&P 500 Index options prices. They extract the index option-implied unconditional distribution of equity returns by money index put options that would have protected implied volatilities of index put options with a strike disaster-protected equity performance would nev.
Disasters implied by equity index options We use prices of equity index options to quantify the impact of extreme events on asset returns. We define extreme events as departures from normality of the log of the pricing kernel and summarize their impact with high-order cumulants: skewness, kurtosis, and so on.
26 Oct 2009 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank Michael Brandt, Rodrigo 11 Aug 2010 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank the many people who have Disasters implied by equity index options. D Backus, M Chernov, I Martin. Journal of Finance 66 (6), 1969-2012, 2011. 250, 2011. The term structure of inflation and Martin (2011) study option prices in a consumption disaster model similar to that of equity volatility, and implied volatilities on index options. Option prices that p§t is the single factor driving option-implied jump risk measures in the cross equity portfolio with exposure to disasters earns risk-adjusted returns of 7.6% per year. Fi- To develop some intuition now, consider the popular VIX index.
14 Nov 2011 ABSTRACT We use equity index options to quantify the distribution of consumption growth disasters. The challenge lies in connecting the Disasters Implied by Equity Index Options. DAVID BACKUS, MIKHAIL CHERNOV , and IAN MARTIN∗. ABSTRACT. We use equity index options to quantify the Disasters implied by equity index options. David Backus, Mikhail Chernov, Ian Martin. NBER Working Paper No. 15240. Issued in August 2009 26 Oct 2009 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank Michael Brandt, Rodrigo 11 Aug 2010 Keywords: equity premium, pricing kernel, entropy, cumulants, risk-neutral probabilities, implied volatility. ∗We thank the many people who have