Arbeitspapier
Relative pricing and risk premia in equity volatility markets
This paper provides empirical evidence that volatility markets are integrated through the time-varying term structure of variance risk premia. These risk premia predict the returns from selling volatility for different horizons, maturities, and products, including variance swaps, straddles, and VIX futures. In addition, the paper derives a closed-form relationship between the prices of variance swaps and VIX futures. While tightly linked, VIX futures exhibit deviations of varying significance from the no-arbitrage prices and bounds implied by the variance swap market. The paper examines these pricing errors and their relationship to VIX futures' return predictability.
- Language
-
Englisch
- Bibliographic citation
-
Series: Staff Report ; No. 867
- Classification
-
Wirtschaft
Financial Econometrics
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
- Subject
-
variance swaps
term structure
variance risk premium
VIX futures
options
return predictability
- Event
-
Geistige Schöpfung
- (who)
-
Van Tassel, Peter
- Event
-
Veröffentlichung
- (who)
-
Federal Reserve Bank of New York
- (where)
-
New York, NY
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the 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
- Federal Reserve Bank of New York
Time of origin
- 2018
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