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Implied Volatility and Risk Aversion in a Simple Model with Uncertain Growth

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Author

  • Frederik Lundtofte

Summary, in English

We show that a simple equilibrium model with uncertain growth is able to simultaneously generate patterns in implied volatility and risk aversion that are similar to the ones observed in the data. In addition, the model produces an implied pricing kernel that is increasing for particular levels of wealth.

Publishing year

2010

Language

English

Pages

182-191

Publication/Series

Economics Bulletin

Volume

30

Issue

1

Document type

Journal article

Publisher

Economics Bulletin

Topic

  • Economics

Keywords

  • option pricing
  • implied volatility
  • implied risk aversion
  • parameter uncertainty

Status

Inpress

ISBN/ISSN/Other

  • ISSN: 1545-2921