General Equilibrium Option Pricing Method: Theoretical and Empirical Study

  • Jian┬áChen

Table of contents

  1. Front Matter
    Pages i-xi
  2. Introduction and Model

    1. Front Matter
      Pages 1-1
    2. Jian Chen
      Pages 3-7
  3. Comparison Between Models

    1. Front Matter
      Pages 21-21
    2. Jian Chen
      Pages 23-34
    3. Jian Chen
      Pages 35-50
  4. Jump Risk Premium

    1. Front Matter
      Pages 51-51
  5. Variance Risk Premium

    1. Front Matter
      Pages 81-81
    2. Jian Chen
      Pages 143-146
  6. Back Matter
    Pages 147-164

About this book

Introduction

This book mainly addresses the general equilibrium asset pricing method in two aspects: option pricing and variance risk premium. First, volatility smile and smirk is the famous puzzle in option pricing. Different from no arbitrage method, this book applies the general equilibrium approach in explaining the puzzle. In the presence of jump, investors impose more weights on the jump risk than the volatility risk, and as a result, investors require more jump risk premium which generates a pronounced volatility smirk. Second, based on the general equilibrium framework, this book proposes variance risk premium and empirically tests its predictive power for international stock market returns.

Keywords

General equilibrium model Volatility smirk Variance risk premium Option pricing International stock market

Authors and affiliations

  • Jian┬áChen
    • 1
  1. 1.Department of Finance, School of EconomicsXiamen UniversityXiamenChina

Bibliographic information

  • DOI https://doi.org/10.1007/978-981-10-7428-8
  • Copyright Information Xiamen University Press and Springer Nature Singapore Pte Ltd. 2018
  • Publisher Name Springer, Singapore
  • eBook Packages Economics and Finance
  • Print ISBN 978-981-10-7427-1
  • Online ISBN 978-981-10-7428-8
  • About this book