Jump and variance risk premia in the S&P 500

摘要

We analyze the risk premia embedded in the S&P 500 spot index and option markets. We use a long time series of spot prices and a large panel of option prices to jointly estimate the diffusive stock risk premium, the price jump risk premium, the diffusive variance risk premium and the variance jump risk premium. The risk premia are statistically and economically significant and move over time. Investigating the economic drivers of the risk premia, we are able to explain up to 63% of these variations. (C) 2016 Elsevier B.V. All rights reserved.