The Pricing Of Jump And Volatility Risk In The Cross-Section Of Stock Returns

With the increasing maturity of the domestic financial market and the financial innovation continues to expand,The variety and size of financial derivatives deals are expanding and the function of the options in the investment?hedging?arbitrage are becoming more and more important.Stock options as an effective tool for risk management of stock market investors It is necessary for us to study the relationship between the stock market risk and the stock market risk in order to make us better use the option to carry out the risk management.Base on the Capital Asset Pricing Model?the intertemporal Capital Asset Pricing Model and the Fama-French 3-factor model,our title structure the jump risk factor and the volatility risk factor in the use of option portfolio.Then we examine the pricing of both aggregate jump and volatility risk in the cross-section of stock returns.From the empirical analysis,we found that jump and volatility risk are all significant pricing factors,and their pricing are negative,but the pricing of the volatility risk is weak.In detail,we first structure the delta neutral option portfolios in the use of 50 ETF option and the optional portfolios are jump risk factor and volatility risk factor.Then we examed the influence degree of jump risk and volatility risk by structure multiple regression model.Furthre more,we srot stocks into five rows base on the bate that obtain from the empirical analysis,Statistic the yield of each group,and further study the variation of the cross section yield of the stock which is caused by the difference of the sensitivity of jump and volatility risk factor.Finally,we examed the influence degree of jump risk and volatility risk in the use of the Fama-Macbeth Model.The result is that jump and volatility risk are all significant pricing factors,and their pricing are negative,but the negative pricing degree of the jump risk is stronger than the volatility risk.As the jump risk and volatility risk have a negative influence to the stock market and the improve of the jump risk and volatility risk performance as the improve of the options price.So,We suggest that when the market jump risk and volatility risk is widely promoted,long the option volatility to hedge for our stocks.