Arbeitspapier
Volatility-of-volatility risk
We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility measures, identified modelfree from the option price data as the VIX and VVIX indices, respectively, are only weakly related to each other. Delta-hedged index and VIX option returns are negative on average, and are more negative for strategies which are more exposed to volatility and volatility-of-volatility risks. Volatility and volatility of volatility significantly and negatively predict future delta-hedged option payoffs. The evidence is consistent with a no-arbitrage model featuring time-varying market volatility and volatility-of-volatility factors, both of which have negative market price of risk.
- Sprache
-
Englisch
- Erschienen in
-
Series: SAFE Working Paper ; No. 210
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
- Thema
-
volatility of volatility
hedging errors
risk premiums
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Huang, Darien
Schlag, Christian
Shaliastovich, Ivan
Thimme, Julian
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
- (wo)
-
Frankfurt a. M.
- (wann)
-
2018
- DOI
-
doi:10.2139/ssrn.3183610
- Handle
- URN
-
urn:nbn:de:hebis:30:3-466768
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Huang, Darien
- Schlag, Christian
- Shaliastovich, Ivan
- Thimme, Julian
- Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
Entstanden
- 2018
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