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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Option-Implied Intra-Horizon Risk and First-Passage Disentanglement |
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| Institution | University of Zurich |
| Series Name | SSRN |
| Number | 2804702 |
| ISSN | 1556-5068 |
| Number of Pages | 66 |
| Date | 2016 |
| 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. |
| Free access at | Official URL |
| Official URL | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2804702 |
| Other Identification Number | merlin-id:13895 |
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