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Investor fears and risk premia for rare events

Schwarz, Claudia - 2014 - This version: January 13, 2014

This paper uses the method developed by Bollerslev and Todorov (2011b) to estimate risk premia for extreme events for the US and the German stock markets. The method extracts jump tail measures from high-frequency futures price data and from options data. In a second step, jump tail...

Persistent link: https://www.econbiz.de/10010249730

Tails, Fears and Risk Premia

Bollerslev, Tim - 2011

We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof we identify and estimate a new Investor Fears index. The index suggests both large and...

Persistent link: https://www.econbiz.de/10013133667

Tails, Fears and Risk Premia

Bollerslev, Tim - 2009

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Persistent link: https://www.econbiz.de/10013158966

Modeling Conditional Factor Risk Premia Implied by Index Option Returns

Fournier, Mathieu; Jacobs, Kris; Orłowski, Piotr - 2021

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. Using index options, we...

Persistent link: https://www.econbiz.de/10013213854

Isolating the Disaster Risk Premium with Equity Options

Horvath, Jaroslav - 2019

to obtain a hedged equity return, which allows me to quantify the disaster risk premium as the difference between the …

Persistent link: https://www.econbiz.de/10012902307

Insurance options : beating the benchmark : are catastrophe bonds more profitable than corporate bonds?

Caro Barrera, José Rafael - In: Revista de métodos cuantitativos para la economía y … 29 (2020), pp. 3-17

In this paper, we establish a comparison between one of the most traded financial derivatives in the markets, the so-called catastrophe bonds (abbreviated as cat bonds) and the corporate bonds. In the first section, we start from a brief definition as well as some basic concepts. In section two,...

Persistent link: https://www.econbiz.de/10012259883

The impact of the financial crisis and natural catastrophes on CAT bonds

Gürtler, Marc; Hibbeln, M.; Winkelvos, C. - 2012

CAT bonds are important instruments for the insurance of catastrophe risk. Due to a low degree of deal standardization, there is uncertainty about the determination of the CAT bond premium. In addition, it is not apparent how CAT bonds react after the financial crisis or a natural catastrophe....

Persistent link: https://www.econbiz.de/10009615124

Macroeconomic Disasters and the Equity Premium Puzzle : Are Emerging Countries Riskier?

Horvath, Jaroslav - 2019

from those of emerging countries. I then estimate distinct disaster risk parameters for these two country groups. My … Bayesian analysis demonstrates that in some aspects advanced countries are more exposed to disaster risk, while in others their … persistent. Advanced countries are also more likely to experience a global disaster, whereas disasters in emerging countries tend …

Persistent link: https://www.econbiz.de/10012902819

Extreme inflation and time-varying consumption growth

Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian - 2019

way to come up with a measure of time-varying disaster risk in the spirit of Wachter (2013). Our findings imply that both … the disaster and the long-run risk paradigm can be extended towards explaining movements in the stock-bond return …

Persistent link: https://www.econbiz.de/10012000570

Aggregate Tail Risk and Expected Returns

Chapman, David A. - 2016

We examine the connection between tail risk — as measured in Kelly and Jiang (2014) — and the cross-section of expected returns. In conditional predictive regression systems and vector-autoregressions of the market portfolio and the long- and shoresides of the Fama-French factor portfolios,...

Persistent link: https://www.econbiz.de/10013005673