Option prices drop as market volatility risk increases, impacting investment strategies.
The article compares option prices in a complex financial model with changing volatility. They find that prices for certain options decrease as the market price of volatility risk goes up. By looking at different pricing measures, they show that option prices can vary based on the level of risk aversion. In a specific model, they demonstrate that option prices decrease as a certain parameter increases. This research helps understand how different factors affect option prices in financial markets.