%0 Journal Article %1 Bollerslev:JF:2011 %A Bollerslev, Tim %A Todorov, Viktor %D 2011 %I Blackwell Publishing Inc %J The Journal of Finance %K disaster equity-premium variance-risk-premium %N 6 %P 2165-2211 %R 10.1111/j.1540-6261.2011.01695.x %T Tails, Fears, and Risk Premia %U http://dx.doi.org/10.1111/j.1540-6261.2011.01695.x %V 66 %X We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof, we identify and estimate a new Investor Fears index. The index reveals large time-varying compensation for fears of disasters. Our empirical investigations involve new extreme value theory approximations and high-frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out-of-the-money options and new model-free implied variation measures for estimating the corresponding risk-neutral expectations.

@article{Bollerslev:JF:2011, abstract = {We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof, we identify and estimate a new Investor Fears index. The index reveals large time-varying compensation for fears of disasters. Our empirical investigations involve new extreme value theory approximations and high-frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out-of-the-money options and new model-free implied variation measures for estimating the corresponding risk-neutral expectations.}, added-at = {2014-11-03T23:20:04.000+0100}, author = {Bollerslev, Tim and Todorov, Viktor}, biburl = {https://www.bibsonomy.org/bibtex/2a52ff4be1be34052fc20ac12a1dac1d5/fcqms}, description = {Tails, Fears, and Risk Premia - BOLLERSLEV - 2011 - The Journal of Finance - Wiley Online Library}, doi = {10.1111/j.1540-6261.2011.01695.x}, interhash = {b96fddc0cd86474ef838f0bd5696c96f}, intrahash = {a52ff4be1be34052fc20ac12a1dac1d5}, issn = {1540-6261}, journal = {The Journal of Finance}, keywords = {disaster equity-premium variance-risk-premium}, number = 6, pages = {2165-2211}, publisher = {Blackwell Publishing Inc}, timestamp = {2014-11-03T23:20:04.000+0100}, title = {Tails, Fears, and Risk Premia}, url = {http://dx.doi.org/10.1111/j.1540-6261.2011.01695.x}, volume = 66, year = 2011 }