Introduction
1.1 Motivation for the Book
1.2 Overview and Structure for the Book
2 General Equilibrium Option Pricing Models
2.1 The Economy and Utility Functions
2.2 Market Risk Premium
2.3 Option Pricing Model
3 Simulation Comparison
3.1 Introduction
3.2 Methodology
3.3 Simulations
3.3.1 Risk-neutral and Physical Jumps
3.3.2 Recursive and Expected Utility Functions .
3.3.3 Lognormal and Uniform Jump Size Distribu
tions
3.4 Conclusions
4 Empirical Comparison
4.1 Introduction
4.2 Option Pricing Models
4.3 Data and Methodology
4.4 Empirical Results
4.4.1 Parameter Estimates and In-sample Fit
4.4.2 Out-of-sample Performance
4.4.3 Jump Risk Premium
4.5 Conclusions
5 Fanning Out Preference and Option Pricing
5.1 Introduction
5.2 Mcdel Setup
5.3 Numerical Studies
5.4 Empirical Analysis
5.4.1 Data and Methodology
5.4.2 Estimation
5.4.3 Implied Risk Premiums
5.4.4 Model Fit and Volatility Smirks
5.5 Concluding Remarks
6 Jump Size Distributions and Option Pricing
6.1 Introduction
6.2 Model Setup
6.3 Empirical Investigation
6.3.1 Data and Methodology
6.3.2 Empirical Results
6.4 Concluding Remarks
7 Risk Aversion Estimated from Volatility Spread
7.1 Introduction
7.2 Methodology
7.2.1 Realized Volatility
7.2.2 Model-free Implied Volatility
7.2.3 Volatility Spread
7.3 Data and Empirical Results
7.3.1 Risk Aversion Estimate
7.4 Conclusions
8 Predictability of VRP: Hongkong Evidence
8.1 Introduction
8.2 Model
8.2.1 Realized Volatility
8.2.2 Model-free Implied Volatility
8.2.3 Variance Risk Premium
8.2.4 Predictability of Stock Return
8.3 Data and Empirical Results
8.3.1 Data
8.3.2 Summary Statistics of Volatility Measures
8.3.3 Variance Risk Premium
8.3.4 Predictability of Stock Return
8.3.5 Evidences during the Financial Crisis Period
8.4 Conclusions
9 Predictability of VRP: Other International Evidence
9.1 Introduction
9.2 Empirical Methodology
9.2.1 Variance Risk Premium
9.2.2 In-sample Predictability Regression
9.3 Data and Summary Statistics
9.4 In-sample Predictability Results
9.5 Concluding Remarks
10 Predictability of VRP: A Comparison Study
10.1 Introduction
10.2 Methodology
10.2.1 Construction of Variance Risk Premium
10.2.2 Stock Return Predictability Regression
10.3 Data and Empirical Results
10.3.1 Data and Summary Statistics
10.3.2 Empirical Results from International Markets
10.4 Concluding Remarks
11 Conclusions
ll.1 Summary
11.2 Future Research
Appendix
A. Non-expected Recursive Utility
B. Jump Risk Premium
C. Variance Risk Premium
D. Covariance Risk Premium
E. Observational Non-equivalence
E Risk-neutral MGF
G. Jump Size Distribution
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