An alternative method for measuring risk compensation of event jumps

Shu-Hsien Chen, Ming-Shann Tsai and Fang-Ling Liao

Applied Financial Economics Letters, 2008, vol. 4, issue 5, 355-361

Abstract: The portfolio management strategy can gain additional wealth from measuring the cost of accounting for events jumps. This study captures the characteristic of jumps on international equities return in the real world. This frame work follows the Das and Uppal (2004) and bridges the gap on the p. 2817. We find, in their study, the problem that exists an expected term in the final solution of compensating wealth. This article also finds some relationship between the jump size and portfolio weights on the risk compensation.

Date: 2008
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DOI: 10.1080/17446540701720683

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