... and Jackwerth (2001), we examine whether ELWs are necessary to replicate the pricing kernel used in asset pricing. We select risk-free asset, underlying stock and ELW as reference assets to replicate the pricing kernel, and find that the pricing kernel cannot be replicated completely without ELWs. This result...

... to estimate the parameters of option pricing kernel. The SNP distribution of the implied volatility contains AR (2) and ARCH effects, and the skewness of the distribution is much higher than normal distribution. The distribution has thinner left tail and fatter right tail than normal distribution, which...

...Joon Hee Rhee This paper examines the pricing of interest rates derivatives such as caps and swaptions in the pricing kernel framework. The underlying state variable is extended to the general infinitely divisible Levy process. For computational purposes, a simple pricing kernel as in Flesaker...

...Jung Soon Hyun; Byung Kun Rhee When the Black-Scholes assumptions hold market is instantaneously complete and options are redundant securities. This paper tests whether options are needed for spanning of the pricing kernel in addition to the risk-free bond and underlying asset in Korean stock index...