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Option Prices with Uncertain Fundamentals: Theory and Evidence on the Dynamics of Implied Volatilities

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  • ALEXANDER DAVID
  • PIETRO VERONESI
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    Paper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 485.

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    Date of creation: Nov 1998
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    Handle: RePEc:wop:chispw:485

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    1. Jonathan Berk & Richard C. Green & Vasant Naik, . "Optimal Investment, Growth Options and Security Returns," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 64, Carnegie Mellon University, Tepper School of Business.
    2. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, American Finance Association, vol. 44(5), pages 1115-53, December.
    3. John Y. Campbell, 1998. "Asset Prices, Consumption, and the Business Cycle," NBER Working Papers 6485, National Bureau of Economic Research, Inc.
    4. Alexander David, 1993. "Fluctuating confidence and stock-market returns," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 461, Board of Governors of the Federal Reserve System (U.S.).
    5. Gennotte, Gerard, 1986. " Optimal Portfolio Choice under Incomplete Information," Journal of Finance, American Finance Association, American Finance Association, vol. 41(3), pages 733-46, July.
    6. René Garcia & Richard Luger & Éric Renault, 2001. "Asymmetric Smiles, Leverage Effects and Structural Parameters," CIRANO Working Papers, CIRANO 2001s-01, CIRANO.
    7. Jackwerth, Jens Carsten & Rubinstein, Mark, 1996. " Recovering Probability Distributions from Option Prices," Journal of Finance, American Finance Association, American Finance Association, vol. 51(5), pages 1611-32, December.
    8. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
    9. Yacine Ait-Sahalia, 1998. "Maximum Likelihood Estimation of Discretely Sampled Diffusions: A Closed-Form Approach," NBER Technical Working Papers 0222, National Bureau of Economic Research, Inc.
    10. Detemple, Jerome B, 1986. " Asset Pricing in a Production Economy with Incomplete Information," Journal of Finance, American Finance Association, American Finance Association, vol. 41(2), pages 383-91, June.
    11. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
    12. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
    13. Hansen, Bruce E, 1994. "Autoregressive Conditional Density Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 705-30, August.
    14. Bakshi, Gurdip & Madan, Dilip, 2000. "Spanning and derivative-security valuation," Journal of Financial Economics, Elsevier, Elsevier, vol. 55(2), pages 205-238, February.
    15. Allan Timmerman & Massimo Guidolin, 2001. "Option prices and implied volatility dynamics under Bayesian learning," CeNDEF Workshop Papers, January 2001, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance P3, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    16. Veronesi, Pietro, 1999. "Stock Market Overreaction to Bad News in Good Times: A Rational Expectations Equilibrium Model," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 12(5), pages 975-1007.
    17. Bates, David S, 1991. " The Crash of '87: Was It Expected? The Evidence from Options Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 46(3), pages 1009-44, July.
    18. Stephen G. Cecchetti & Pok-sang Lam & Nelson C. Clark, 1991. "The Equity Premium and the Risk Free Rate: Matching the Moments," NBER Working Papers 3752, National Bureau of Economic Research, Inc.
    19. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "An Intertemporal General Equilibrium Model of Asset Prices," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 363-84, March.
    20. Stein, Elias M & Stein, Jeremy C, 1991. "Stock Price Distributions with Stochastic Volatility: An Analytic Approach," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 4(4), pages 727-52.
    21. Jacquier, Eric & Jarrow, Robert, 2000. "Bayesian analysis of contingent claim model error," Journal of Econometrics, Elsevier, Elsevier, vol. 94(1-2), pages 145-180.
    22. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, Elsevier, vol. 52(1-2), pages 5-59.
    23. Nicholas Barberis & Ming Huang & Tano Santos, 2001. "Prospect Theory And Asset Prices," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(1), pages 1-53, February.
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