Capturing Option Anomalies with a Variance-Dependent Pricing Kernel

• 成果类型: Article
• 署名作者: Christoffersen, Peter; Heston, Steven; Jacobs, Kris
• 署名单位: University of Toronto; Copenhagen Business School; University System of Maryland; University of Maryland College Park; University of Houston System; University of Houston; Tilburg University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hht033
• 发表日期: 2013
• 页码: 1963
• 关键词: STATE-CONTINGENT CLAIMS; stochastic volatility; information-content; MARKET VOLATILITY; risk premia; prices; valuation; implicit; GARCH; MODEL

摘要

We develop a GARCH option model with a new pricing kernel allowing for a variance premium. While the pricing kernel is monotonic in the stock return and in variance, its projection onto the stock return is nonmonotonic. A negative variance premium makes it U shaped. We present new semiparametric evidence to confirm this U-shaped relationship between the risk-neutral and physical probability densities. The new pricing kernel substantially improves our ability to reconcile the time-series properties of stock returns with the cross-section of option prices. It provides a unified explanation for the implied volatility puzzle, the overreaction of long-term options to changes in short-term variance, and the fat tails of the risk-neutral return distribution relative to the physical distribution.