Lévy jump risk: Evidence from options and returns
Lévy 跳跃风险：来自期权与收益的证据
Using index options and returns from 1996 to 2009, I estimate discrete-time models where asset returns follow a Brownian increment and a Lévy jump. Time variations in these models are generated with an affine GARCH, which facilitates the empirical implementation. I find that the risk premium implied by infinite-activity jumps contributes to more than half of the total equity premium and dominates that of the Brownian increments suggesting that it is more representative of…