General equilibrium pricing of options with habit formation and event risks

• 成果类型: Article
• 署名作者: Du, Du
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.09.001
• 发表日期: 2011
• 页码: 400-426
• 关键词: habit formation; Economic disasters; Jump-risk premium; Volatility smirk

摘要

This paper proposes a general equilibrium model that explains the pricing of the S&P 500 index options. The central ingredients are a peso component in the consumption growth rate and the time-varying risk aversion induced by habit formation which amplifies consumption shocks. The amplifying effect generates the excess volatility and a large jump-risk premium which combine to produce a pronounced volatility smirk for index options. The time-varying volatility and jump-risk premiums explain the observed state-dependent smirk patterns. Besides volatility smirks, the model has a variety of other implications which are broadly consistent with the aggregate stock and option market data. (C) 2010 Elsevier B.V. All rights reserved.