Arbeitspapier
The law of one price in equity volatility markets
This paper documents law of one price violations in equity volatility markets. While tightly linked by no-arbitrage restrictions, the prices of VIX futures exhibit significant deviations relative to their option-implied upper bounds. Static arbitrage opportunities occur when the prices of VIX futures violate their bounds. The deviations widen during periods of market stress and predict the returns of VIX futures. A relative value trading strategy based on the deviation measure earns a large Sharpe ratio and economically significant alpha-to-margin. There is evidence that systematic risk and demand pressure contribute to the variation in the no-arbitrage deviations over time.
- Sprache
-
Englisch
- Erschienen in
-
Series: Staff Report ; No. 953
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
Financial Econometrics
- Thema
-
limits-to-arbitrage
VIX futures
variance swaps
volatility
return predictability
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Van Tassel, Peter
- Ereignis
-
Veröffentlichung
- (wer)
-
Federal Reserve Bank of New York
- (wo)
-
New York, NY
- (wann)
-
2020
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Van Tassel, Peter
- Federal Reserve Bank of New York
Entstanden
- 2020
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