Option pricing under time-varying risk-aversion with applications to risk forecasting

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• 作者：Rü ; diger Kiesel ; ^a ; ^b ; ^{ruediger.kiesel@uni-due.de} ; Florentin Rahe^c ; ^d ; ^{f.rahe@gmx.de}
• 关键词：Pricing kernel ; Option pricing ; Implied risk premium ; Value-at-Risk forecast
• 刊名：Journal of Banking & Finance
• 出版年：2017
• 出版时间：March 2017
• 年：2017
• 卷：76
• 期：Complete
• 页码：120-138
• 全文大小：4744 K
• 卷排序：76

文摘

We present a two-factor option-pricing model, which parsimoniously captures the difference in volatility persistences under the historical and risk-neutral probabilities. The model generates an S-shaped pricing kernel that exhibits time-varying risk aversion. We apply our model for two purposes. First, we analyze the risk preference implied by S&P500 index options during 2001–2009 and find that risk-aversion level strongly increases during stressed market conditions. Second, we apply our model for Value-at-Risk (VaR) forecasts during the subprime crisis period and find that it outperforms several leading VaR models.