It looks like you're new here. If you want to get involved, click one of these buttons!
Full Research Paper:The work is motivated by providing evidence that U.S. stock crashes typically coincide with large consumption drops and showing that the equity risk premium exhibits ample negative skewness, even after being standardized by a measure of stochastic volatility. The equity risk premium is computed as the difference between the total returns on the S&P 500 index and one-month Treasury bills. I form the hedged risk premium as a combination of the equity risk premium and S&P 500 index put options such that at the initiation of the trade the risk exposure of the equity and hedged risk premiums is comparable – the option overlay is hedged, and when the put option expires in the money, the hedged risk premium is
protected from all stock crash risk. In other words, the hedged investment strategy protects the investor from potential stock crashes below a certain strike price.
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla