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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Option-Implied Intra-Horizon Value-at-Risk
Organization Unit
Authors
  • Markus Leippold
  • Nikola Vasiljevic
Item Subtype Original Work
Refereed Yes
Status Published electronically before print/final form (Epub ahead of print)
Language
  • English
Journal Title Management Science
Publisher Institute for Operations Research and the Management Science
Geographical Reach international
ISSN 0025-1909
Volume forthcoming
Page Range Epub ahead of print
Date 2019
Abstract Text We study the intra-horizon value at risk (iVaR) in a general jump diffusion setup and propose a new model of asset returns called displaced mixed-exponential model, which can arbitrarily closely approximate finite-activity jump-diffusions and completely monotone Levy processes. We derive analytical results for the iVaR and disentangle the risk contribution of jumps from diffusion. Estimating the iVaR for several popular jump models using on S&P 100 option data, we find that option-implied estimates are much more responsive to market changes relative to their historical counterparts. Moreover, disentangling jumps from diffusion, jump account for about 90 percent of iVaR on average.
Other Identification Number merlin-id:16459
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