Jump Contagion among Stock Market Indices: Evidence from Option Markets

This paper explores the contagious propagation of jumps among international stock market indices by exploiting a rich panel stock and options data. We propose multivariate option pricing model designed to allow for, but not superimpose, time space amplification in markets. develop semi-parametric estimation procedure employing continuum moments conditions GMM with implied states. introduce partial-information approach reduce computational complexity arising setting, derive asymptotic properties our estimators, analyze their finite-sample performance. Our empirical results reveal evidence jump contagion markets, both from US Europe vice versa, leading UK standing on equal footing Germany. illustrate importance capturing for risk management, pricing, scenario analysis.