Skewness Premium with Lévy Processes

José Fajardo () and Ernesto Mordecki ()
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Ernesto Mordecki: Centro de Matemática, Facultad de Ciencias, Universidad de la República, Montevideo. Uruguay, Postal: Centro de Matemática, Facultad de Ciencias, Universidad de la República, Montevideo. Uruguay

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We study the skewness premium (SK) introduced by Bates (1991) in a general context using Lévy Processes. Under a symmetry condition Fajardo and Mordecki (2006) have obtained that SK is given by the Bate's x% rule. In this paper, we study SK under the absence of that symmetry condition. More exactly, we derive sufficient conditions for the excess of SK to be positive or negative, in terms of the characteristic triplet of the Lévy Process under the risk neutral measure.

Keywords: Skewnes Premium; Lévy Processes (search for similar items in EconPapers)
JEL-codes: C52 G10 (search for similar items in EconPapers)
Pages: 17
Date: 2009-03-04
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Working Paper: Skewness Premium with Lévy Processes (2006)
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