Options and higher-order risk premiums

This dissertation ventures beyond the traditional confines of Brownian motion and the assumption of log-normality in the finance literature, in both econometrics and economics ways. It not only involves the structural estimation of the parametric jump diffusion model and the nonparametric econometrics techniques, but also provides the asset pricing implications on the higher order risk premiums and the theoretical characterization of the variance risk premium on the equity options. From these attempts, it is shown that venturing beyond normality helps us to further understand the patterns in both stock and option markets and the dynamics of the higher order risk premiums.