VGSF - WU Vienna - LC

Maria Kosolapova, Free University of Bozen-Bolzano

Campus WU TC.5.27 12:00 - 13:00

Organizer WU Vienna

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.

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Maria Kosol­apova, Free Uni­versity of Bozen-Bolzano

Es­tim­at­ing Time-Vary­ing Risk Aver­sion from Op­tion Prices and Real­ized Re­turns

We com­bine risk-neut­ral dens­it­ies from equity in­dex op­tions with real­ized in­dex re­turns to es­tim­ate the mar­ket's risk aver­sion. Start­ing from a power util­ity frame­work with con­stant risk aver­sion, we ex­tend it by more flex­ible stochastic dis­count factors. We al­low for time-vary­ing risk aver­sion of the mar­ginal in­vestor and we base our es­tim­a­tion as much as possible on for­ward-look­ing in­form­a­tion. While the levels of the res­ult­ing es­tim­ates for risk aver­sion and ex­pec­ted re­turns are in line with the lit­er­at­ure, we find the pri­cing ker­nel puzzle to be only an in­ter­mit­tent phenomenon, and our res­ults point to pro-­cyc­lical risk aver­sion.



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