Abstract
Option prices jump whenever there is a jump in either the price or volatility of the underlying asset. High-frequency jump tests are applied to the prices of both futures contracts and their options in order to infer the properties of price and volatility jumps. The empirical results for FTSE-100 contracts show that jumps in price and jumps in volatility are, firstly, smaller than those assumed or estimated in previous research and, secondly, do not occur independently. The price jump risk premium is shown to be a more important factor than the volatility jump risk premium. Monte Carlo methods confirm that our empirical jump detection methods are reliable for a selection of jump-diffusion processes.