Artikel,
Tails, Fears, and Risk Premia
The Journal of Finance, 66 (6): 2165-2211 (2011)
DOI: 10.1111/j.1540-6261.2011.01695.x
Zusammenfassung
We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof, we identify and estimate a new Investor Fears index. The index reveals large time-varying compensation for fears of disasters. Our empirical investigations involve new extreme value theory approximations and high-frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out-of-the-money options and new model-free implied variation measures for estimating the corresponding risk-neutral expectations.
