Forecasting Volatility and Option Prices of the S&P 500 Index
β Scribed by Noh, Jaesun; Engle, Robert F; Kane, Alex
- Book ID
- 126905824
- Publisher
- Institutional Investor
- Year
- 1994
- Tongue
- English
- Weight
- 429 KB
- Volume
- 2
- Category
- Article
- ISSN
- 1074-1240
No coin nor oath required. For personal study only.
π SIMILAR VOLUMES
We are grateful to Paul D. Koch (referee) and an anonymous referee for helpful comments and suggestions.
## Abstract The authors examine whether volatility risk is a priced risk factor in securities returns. Zeroβbeta atβtheβmoney straddle returns of the S&P 500 index are used to measure volatility risk. It is demonstrated that volatility risk captures time variation in the stochastic discount factor.
This article is the first attempt to test empirically a numerical solution to price American options under stochastic volatility. The model allows for a mean-reverting stochastic-volatility process with non-zero risk premium for the volatility risk and correlation with the underlying process. A gene