Modeling Conditional Factor Risk Premia Implied by Index Option Returns

• 成果类型: Article
• 署名作者: Fournier, Mathieu; Jacobs, Kris; Orlowski, Piotr
• 署名单位: University of Houston System; University of Houston; Universite de Montreal; HEC Montreal; University of New South Wales Sydney
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13324
• 发表日期: 2024
• 页码: 2289-2338
• 关键词: TIME-VARYING RISK; cross-section; stochastic volatility; rare disasters; P 500; DYNAMICS; MARKET; demand; CAPM; bond

摘要

We propose a novel factor model for option returns. Option exposures are estimated nonparametrically, and factor risk premia can vary nonlinearly with states. The model is estimated using regressions with minimal assumptions on factor and option return dynamics. We estimate the model using index options to characterize the conditional risk premia for factors of interest, such as the market return, market variance, tail and intermediary risk factors, higher moments, and the VIX term structure slope. Together, market return and variance explain more than 90% of option return variation. Unconditionally, the magnitude of the variance risk premium is plausible. It displays pronounced time variation, spikes during crises, and always has the expected sign.