Are Jumps in Stock Returns Diversifiable? Evidence and Implications for Option Pricing
研究股票收益中跳跃风险的可分散性，发现指数和成分股中的泊松跳跃构成不可分散风险，挑战了期权定价中跳跃风险不被定价的标准假设。
This paper studies the diversiflability of jumps in stock returns. It presents a multivariate time-series model of the stochastic process for an index and its component stocks that explicitly admits discrete common jumps. Maximum likelihood estimation for such a model is developed and applied to the daily Major Market Index and its component stocks for the period 1985 through 1990. The paper finds that Poisson-distributed jumps observed from both the index and its component stocks constitute nondiversiflable risk, implying that the standard assumption in option pricing that these jumps are not priced may be invalid.