Information about price and volatility jumps inferred from options prices

Taylor, Stephen John and Tzeng, Joseph and Widdicks, Martin (2018) Information about price and volatility jumps inferred from options prices. Journal of Futures Markets, 38 (10). pp. 1206-1226. ISSN 0270-7314

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Abstract

High‐frequency jump tests are applied to the prices of both futures contracts and their options, to infer the properties of jumps in the price and volatility of the underlying asset. Empirical results for FTSE 100 contracts detect frequent jumps in futures, call, and put prices. Jumps in futures prices are more important than any jumps in volatility when the market determines option prices. The empirical evidence is consistent with futures prices following affine jump‐diffusion processes, containing either futures price jumps or contemporaneous futures price, and volatility jumps, providing jump risk premia are included in the price dynamics.

Item Type: Journal Article
Journal or Publication Title: Journal of Futures Markets
Additional Information: This is the peer reviewed version of the following article:Taylor SJ, Tzeng C‐F, Widdicks M. Information about price and volatility jumps inferred from options prices. J Futures Markets. 2018;38:1206–1226. https://doi.org/10.1002/fut.21914 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/fut.21914 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
Uncontrolled Keywords: /dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 90200
Deposited By: ep_importer_pure
Deposited On: 08 Feb 2018 16:34
Refereed?: Yes
Published?: Published
Last Modified: 10 Dec 2019 05:02
URI: https://eprints.lancs.ac.uk/id/eprint/90200

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