Arbeitspapier
Global variance term premia and intermediary risk appetite
Sellers of variance swaps earn time-varying risk premia for their exposure to realized variance, the level of variance swap rates, and the slope of the variance swap curve. To measure risk premia, we estimate a dynamic term structure model that decomposes variance swap rates into expected variances and term premia. Empirically, we document a strong global factor structure in variance term premia across the U.S., U.K., Europe, and Japan. We further show that variance term premia are negatively correlated with the risk appetite of hedge funds, broker-dealers, and mutual funds. Our results support the hypothesis that financial intermediaries are marginal investors in the variance swap market.
- Language
-
Englisch
- Bibliographic citation
-
Series: Staff Report ; No. 789
- Classification
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Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
Financial Econometrics
- Subject
-
variance swap
variance risk premium
term structure
empirical asset pricing
volatility
financial intermediaries
- Event
-
Geistige Schöpfung
- (who)
-
Van Tassel, Peter
Vogt, Erik
- Event
-
Veröffentlichung
- (who)
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Federal Reserve Bank of New York
- (where)
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New York, NY
- (when)
-
2016
- Handle
- Last update
- 10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Van Tassel, Peter
- Vogt, Erik
- Federal Reserve Bank of New York
Time of origin
- 2016
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