Dynamic Jump Intensities and Risk Premiums: Evidence from S&P500 and Options

Peter F. Christoffersen, Kris Jacobs, Chayawat Ornthanalai

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We build a new class of discrete-time models that are relatively easy to estimate using returns and/or options. The distribution of returns is driven by two factors: dynamic volatility and dynamic jump intensity. Each factor has its own risk premium. The models significantly outperform standard models without jumps when estimated on S&P500 returns. We find very strong support for time-varying jump intensities. Compared to the risk premium on dynamic volatility, the risk premium on the dynamic jump intensity has a much larger impact on option prices. We confirm these findings using joint estimation on returns and large option samples.
TidsskriftJournal of Financial Economics
Udgave nummer3
Sider (fra-til)447-472
StatusUdgivet - dec. 2012


  • Compound Poisson jumps
  • Risk premiums
  • Fat tails
  • Analytical filtering