Stocks with high idiosyncratic volatility perform poorly relative to low idiosyncratic volatility stocks. We offer a … volatility (the positive contemporaneous relation between firm-level stock returns and idiosyncratic volatility). Our approach is … idiosyncratic volatility rises, driving down the firm's systematic risk and hence its expected return - firms with higher …

In recent years there has been a remarkable growth of volatility options. In particular, VIX options are among the most … actively trading contracts at CBOE. These options exhibit upward sloping volatility skew and the shape of the skew is largely … independent of the volatility level. To take into account these stylized facts, this article introduces a novel two …

distribution was found. The implied volatility dependencies for the equilibrium conditions and with predicted utility and liquidity …

We extend and generalize some results on bounding security prices under several stochastic volatility models that …

stochastically correlated default intensities, or multivariate dynamic portfolio choice with volatility and correlation jumps. We … implied volatility skew term structures that are largely unrelated to the level and composition of the spot volatility. This … options. Second, we find that volatility and correlation jumps can imply an economically relevant intertemporal hedging demand …

prices caused by stochastic volatility. -- option pricing ; autoregression ; heteroskedasticity ; GARCH ; leverage effect …

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks … traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a …-form and structural models of stochastic volatility …

the derivation of a unique variance risk premium and price of volatility risk based only on the underlying return and … volatility dynamics for a wide class of stochastic volatility (SV) models. The SD approach also derives under similar conditions … volatility risk prices yield in option values in comparison to prices extracted from observed option market data. We also present …

We develop a novel method to decompose a straddle into a volatility risk portfolio and a jump risk portfolio. The …. We use the straddle decomposition to analyze the volatility risk premium and the jump risk premium embedded in a straddle … volatility risk portfolio persistently generates positive returns during earnings announcement periods …

The quintic Ornstein-Uhlenbeck volatility model is a stochastic volatility model where the volatility process is a … a simple integration against a Gaussian density; simulation of the volatility process is exact; and pricing SPX products …