Skewness Premium with Lévy Processes
AbstractWe study the skewness premium (SK) introduced by Bates (1991) in a general context using Lévy Processes. We obtain sufficient and necessary conditions for Bate's x% rule to hold. Then, we derive sufficient conditions for SK to be positive, in terms of the characteristic triplet of the Lévy Process under the risk neutral measure.
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Bibliographic InfoPaper provided by Economics Research Group, IBMEC Business School - Rio de Janeiro in its series IBMEC RJ Economics Discussion Papers with number 2006-04.
Date of creation: 24 Oct 2006
Date of revision:
Skewness 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-2006-10-28 (All new papers)
- NEP-ETS-2006-10-28 (Econometric Time Series)
- NEP-FIN-2006-10-28 (Finance)
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