implied risk premium, expected risk free rate and their volatilities comparable to the magnitudes observed in data. The model … with fat tails leads to a significant increase in implied risk premia over the benchmark Gaussian model, but similar risk …

This paper uses the method developed by Bollerslev and Todorov (2011b) to estimate risk premia for extreme events for … method to German data yields very similar results to the ones shown for the US data. The risk premia for rare events … constitute a considerable part of the total equity and variance risk premia for both markets. When using the results to build an …