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dc.contributor.authorBranger, Nicoleen
dc.contributor.authorSchlag, Christianen
dc.date.accessioned2009-01-29T16:05:22Z-
dc.date.available2009-01-29T16:05:22Z-
dc.date.issued2004-
dc.identifier.urihttp://hdl.handle.net/10419/23405-
dc.description.abstractWhen options are traded, one can use their prices and price changes to draw inference about the set of risk factors and their risk premia. We analyze tests for the existence and the sign of the market prices of jump risk that are based on option hedging errors. We derive a closed-form solution for the option hedging error and its expecta- tion in a stochastic jump model under continuous trading and correct model specification. Jump risk is structurally different from, e.g., stochastic volatility: there is one market price of risk for each jump size (and not just the market price of jump risk). Thus, the expected hedging error cannot identify the exact structure of the compensation for jump risk. Furthermore, we derive closed form solutions for the expected option hedging error under discrete trading and model mis-specification. Compared to the ideal case, the sign of the expected hedging error can change, so that empirical tests based on simplifying assumptions about trading frequency and the model may lead to incorrect conclusions.en
dc.language.isoengen
dc.publisher|aJohann Wolfgang Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften |cFrankfurt a. M.en
dc.relation.ispartofseries|aWorking Paper Series: Finance & Accounting |x140en
dc.subject.jelG13en
dc.subject.jelG12en
dc.subject.ddc330en
dc.subject.keywordStochastic jumpsen
dc.subject.keywordmarket prices of risken
dc.subject.keyworddiscrete tradingen
dc.subject.keywordmodel mis-specificationen
dc.subject.keywordhedging erroren
dc.subject.stwOptionspreistheorieen
dc.subject.stwHedgingen
dc.subject.stwStochastischer Prozessen
dc.subject.stwTheorieen
dc.titleIs Jump Risk Priced? What We Can (and Cannot) Learn From Option Hedging Errors-
dc.typeWorking Paperen
dc.identifier.ppn474584321en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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