Skewness Premium with Lévy Processes
AbstractWe study the skewness premium (SK) introduced by Bates (1991) in a general context using Lévy Processes. Under a symmetry condi- tion Fajardo and Mordecki (2006) have obtained that SK is given by the Bate's x% rule. In this paper, we study SK under the absence of that symmetry condition. More exactly, we derive sufficient con- ditions for the excess of SK to be positive or negative, in terms of the characteristic triplet of the Lévy Process under the risk neutral measure.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2009-10.
Date of creation: 04 Mar 2009
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Skewnes Premium; Lévy Processes;
Other versions of this item:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
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