Emese Lazar, Shuyuan Qi, Radu Tunaru
arXiv 16 Oct 2020 · Econometrics · publishedJournal of Financial Econometrics (2024) · 3 citations (OpenAlex)
arXiv:2010.08113 · PDF · DOI · OpenAlex · Extracted main text
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to Levy jump models and affine jump-diffusion models. We investigate the impact of parameter estimation risk and model specification risk on the models' ability to capture the joint dynamics of stock and option prices. We estimate the parameters using Markov chain Monte Carlo techniques, under the risk-neutral probability measure and the real-world probability measure jointly. We find strong evidence supporting modeling of price jumps.
appendix boundary found by appendix_command · 78% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Broadie, M., Chernov, M., Johannes, M (2007) Model specification and risk premia: Evidence from futures options | 1.000 | 7 | 3 | 100% |
| 2 | Yu, C. L., Li, H., Wells, M. T (2011) MCMC estimation of Lévy jump models using stock and option prices | 0.976 | 14 | 6 | 93% |
| 3 | Merton, R. C (1976) Option pricing when underlying stock returns are discontinuous | 0.737 | 3 | 2 | 100% |
| 4 | Li, H., Wells, M. T., Yu, C. L (2008) A Bayesian analysis of return dynamics with Lévy jumps | 0.644 | 3 | 2 | 67% |
| 5 | Eraker, B (2004) Do stock prices and volatility jump? Reconciling evidence from spot and option prices | 0.644 | 2 | 2 | 100% |
| 6 | Duffie, D., Pan, J., Singleton, K (2000) Transform analysis and asset pricing for affine jump-diffusions | 0.585 | 3 | 1 | 100% |
| 7 | Green, T. C., Figlewski, S (1999) Market risk and model risk for a financial institution writing options | 0.585 | 3 | 1 | 100% |
| 8 | Pan, J (2002) The jump-risk premia implicit in options: Evidence from an integrated time-series study | 0.585 | 3 | 1 | 100% |
| 9 | Bardgett, C., Gourier, E., Leippold, M (2019) Inferring volatility dynamics and risk premia from the S&P 500 and VIX markets | 0.511 | 2 | 1 | 100% |
| 10 | Bates, D. S (2000) Post-'87 crash fears in the S&P 500 futures option market | 0.511 | 2 | 1 | 100% |
Showing the top 10 of 46 scored citations.