The term structures of expected loss and gain uncertainty / by Bruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tédongap and Lai Xu.: FB3-5/2020-19E-PDF
"We document that the term structures of risk-neutral expected loss and gain uncertainty on S&P 500 returns are upward sloping on average. These shapes mainly reflect the higher premium required by investors to hedge downside risk and the belief that potential gains will increase in the long run. The term structures exhibit substantial time-series variation with large negative slopes during crisis periods. Through the lens of Andersen et al.’s (2015) framework, we evaluate the ability of existing reduced-form option pricing models to replicate these term structures. We stress that three ingredients are particularly important: (i) the inclusion of jumps, (ii) disentangling the price of negative jump risk from its positive analog in the stochastic discount factor specification, and (iii) specifying three latent factors"--Abstract, page ii.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.888239&sl=0
| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | The term structures of expected loss and gain uncertainty / by Bruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tédongap and Lai Xu. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2020-19 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | Cover title. "Last updated: June 3, 2020." Includes bibliographical references. |
| Publishing information | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2020. ©2020 |
| Author / Contributor | Feunou, Bruno, author. |
| Description | 1 online resource (78 pages in various pagings) : graphs (mostly colour). |
| Catalogue number |
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| Subject terms | Stock exchanges -- Econometric models -- Canada. Rate of return -- Econometric models -- Canada. Risk-return relationships -- Econometric models -- Canada. Bourse -- Modèles économétriques -- Canada. Taux de rendement -- Modèles économétriques -- Canada. Rapport risque-rendement -- Modèles économétriques -- Canada. |