Leverage Effect, Volatility Feedback, and Self-Exciting Market Disruptions
研究了指数波动率与收益之间负相关的三种渠道：财务杠杆、系统性风险冲击以及市场大幅下跌的自激行为，并提出了一个综合模型来评估它们对指数和个股期权定价的相对贡献。
Equity index volatility variation and its interaction with the index return can come from three distinct channels. First, index volatility increases with the market’s aggregate financial leverage. Second, positive shocks to systematic risk increase the cost of capital and reduce the valuation of future cash flows, generating a negative correlation between the index return and its volatility, regardless of financial leverage. Finally, large negative market disruptions show self-exciting behaviors. This article proposes a model that incorporates all three channels and examines their relative contribution to index option pricing and stock option pricing for different types of companies.