Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors. When the hedge is performed under the ideal conditions of continuous trading and correct model specification, the sign of the premium is the same as the sign of the mean hedging...

When 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...

We introduce Implied Volatility Duration (IVD) as a new measure for the timing of uncertainty resolution, with a high IVD corresponding to late resolution. Portfolio sorts on a large cross-section of stocks indicate that investors demand on average more than five percent return per year as a...

We propose a long-run risk model with stochastic volatility, a time-varying mean reversion level of volatility, and jumps in the state variables. The special feature of our model is that the jump intensity is not affine in the conditional variance but driven by a separate process. We show that...

We study the estimation, the dynamics, and the predictability of option-implied risk-neutral moments (variance, skewness, and kurtosis) for individual stocks from various perspectives. We first show that it is in the estimation of the higher moments essential to use an interpolation with a...

A growing literature analyzes the cross-section of single stock option returns, virtually always under the (implicit or explicit) assumption of a monotonically decreasing pricing kernel. Using option returns, we non-parametrically provide significant and robust evidence that the pricing kernel...