Integrated Time-Series Analysis of Spot and Option Prices

摘要: This paper examines the joint time series of S&P 500 index and near-the-money short-dated option prices with an arbitrage-free model, capturing both stochastic volatility jumps. Jump-risk premia uncovered from data respond quickly to market volatility, becoming more prominent during volatile markets. form jump-risk is important not only in reconciling dynamics implied by data, but also explaining "smirks" cross-sectional options data. Further diagnostic tests suggest a stochastic-volatility model two factors --- one strongly persistent, other mean-reverting highly volatile.