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Short-Maturity Options And Jump Memory


  • Tom Arnold
  • Jimmy E. Hilliard
  • Adam Schwartz


We investigate jump memory using an extensive database of short-term S&P 500 index options. Jump memory refers to the attenuation of the implied jump intensity and magnitude parameters following a crash event. We use a genetic algorithm to obtain a time series of implied parameter estimates and posit behavioral and rational explanations for parameter attenuation following a crash event. We find that a nested form of the jump-diffusion model sharpens the remaining parameter estimates and has a negligible effect on pricing accuracy. 2007 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Tom Arnold & Jimmy E. Hilliard & Adam Schwartz, 2007. "Short-Maturity Options And Jump Memory," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 30(3), pages 437-454.
  • Handle: RePEc:bla:jfnres:v:30:y:2007:i:3:p:437-454

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