Gurdip Bakshi
We formalize the notion of local time risk premium in the context of a theory in which the pricing kernel is a general diffusion process with spanned and unspanned components.
- Date
- Thursday 28 Mar 2019, 16:00 - 17:00
- Type
- Seminar
- Spoken Language
- English
- Room
- EB-12
- Building
- E Building
- Location
- Campus Woudestein
We derive results on the expected excess return of options on bond futures. These results are organized around our new empirical finding that the average returns of out-of-the-money puts and calls, on Treasury bond futures, are negative. Our theoretical reconciliation warrants a negative local time risk premium, and our treatment refines the search for models with market incompleteness and independent sources of volatility risk.
