TY  - UNPD
A1  - Branger, Nicole
A1  - Schlag, Christian
T1  - Is jump risk priced? - What we can (and cannot) learn from option hedging errors : [This version: November 26, 2004]
N2  - 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 for the option hedging error and its expectation 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 \emph{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.
T3  - Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting - 140 
KW  - Optionspreistheorie / Hedging / Stochastischer Prozess / Theorie
KW  - Stochastic jumps
KW  - market prices of risk
KW  - discrete trading
KW  - model mis-specification
KW  - hedging error
Y1  - 2004
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/3711
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-17663
N1  - Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 140
IS  - November 26, 2004 §
PB  - Univ., Fachbereich Wirtschaftswiss.
CY  - Frankfurt am Main
ER  -