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Volatility and jump risk in option returns

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journal contribution
posted on 26.04.2022, 21:22 authored by B Guo, Hai LinHai Lin
We examine the importance of volatility and jump risk in the time-series prediction of S&P 500 index option returns. The empirical analysis provides a different result between call and put option returns. Both volatility and jump risk are important predictors of put option returns. In contrast, only volatility risk is consistently significant in the prediction of call option returns over the sample period. The empirical results support the theory that there is option risk premium associated with volatility and jump risk, and reflect the asymmetry property of S&P 500 index distribution.

History

Preferred citation

Guo, B. & Lin, H. (2020). Volatility and jump risk in option returns. Journal of Futures Markets, 40(11), 1767-1792. https://doi.org/10.1002/fut.22107

Journal title

Journal of Futures Markets

Volume

40

Issue

11

Publication date

01/11/2020

Pagination

1767-1792

Publisher

Wiley

Publication status

Published

Online publication date

03/03/2020

ISSN

0270-7314

eISSN

1096-9934

Language

en