Subjective Model Uncertainty, Variance Risk Premium, and Speculative Trading

时间:2018-04-10浏览:29设置

ShanghaiTech SEM Working Paper No. 2018-002

  

Ming Guo

ShanghaiTech University - School of Entrepreneurship and Management

Hao Zhou

Tsinghua University - PBC School of Finance


  

Abstract  

This paper develops a dynamic model of prices and trades in a risky security and an option, where agents use different subjective likelihood functions to interpret a public signal, but they are initially uncertain about the signa's mean or precision...


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Keywords: Subjective model uncertainty, signal mean and precision, option-implied uncertainty premium, variance risk premium, trading volume.


JEL Classification: G11, G12, G13.

  

Date Written: March 28, 2018

  

Available at SSRN: http://ssrn.com/abstract=3159702

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