Volatility-dependent probability weighting and the dynamics of the pricing kernel puzzle

DOI10.1007/s11147-023-09197-3zbMATH Open1537.91317MaRDI QIDQ6549856

Jan Krupski, Maik Dierkes, Sebastian Schroen, Philipp Sibbertsen

Publication date: 4 June 2024

Published in: Review of Derivatives Research (Search for Journal in Brave)

zbMATH Keywords

risk preferencesvolatilityprobability weightingpricing kernel puzzle

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20)

Cites Work

• Measuring the time stability of prospect theory preferences
• Cumulative prospect theory's functional menagerie
• A tale of two option markets: pricing kernels and volatility risk
• Advances in prospect theory: cumulative representation of uncertainty
• Violations of the betweenness axiom and nonlinearity in probability
• Testing monotonicity of pricing kernels
• The pricing kernel puzzle in forward looking data
• Nonparametric risk management and implied risk aversion
• Post-'87 crash fears in the S\&P 500 futures option market
• Option-implied lottery demand and IPO returns
• Indistinguishability of small probabilities, subproportionality, and the common ratio effect
• Prospect theory and asset prices
• Parameter-Free Elicitation of Utility and Probability Weighting Functions
• What Determines the Shape of the Probability Weighting Function Under Uncertainty?
• Curvature of the Probability Weighting Function
• The Probability Weighting Function
• Transform Analysis and Asset Pricing for Affine Jump-diffusions
• Three Solutions to the Pricing Kernel Puzzle*

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