Volatility risk premium decomposition of LIFFE equity options

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• 作者：Bing-Huei Lin^a ; ¹ ; ^{linbh@dragon.nchu.edu.tw} ; Yueh-Neng Lin^a ; ² ; ^{ynlin@dragon.nchu.edu.tw} ; Yin-Jung Chen^b ; ^{desiree@mail.sju.edu.tw}
• 关键词：G12 ; G13 ; G14
• 刊名：International Review of Economics and Finance
• 出版年：2012
• 期刊代码：23_10590560
• 类别：eco
• 出版时间：October, 2012
• 卷：24
• 期：Complete
• 页码：315-326
• 文件大小：236 K

摘要

This study extends Bakshi and Kapadia's (2003b) framework to a multi-factor model to verify the common macro-factors attributed to the price of volatility risk in U.K. equity options. The results point out the presence of a negative risk premium and indicate that both idiosyncratic volatility and macro-factor volatilities arising from shocks to an index of industrial production and unanticipated inflation are priced in the individual LIFFE equity options. The evidence suggests that option investors are willing to pay for hedging against the shocks to those macro-factors and idiosyncratic risk.