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Relative pricing and risk premia in equity volatility markets

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Bibliographic Details
Authors and Corporations: Van Tassel, Peter (Author)
Type of Resource: E-Book
Language: English
published:
Series: Federal Reserve Bank of New York: Staff reports ; no. 867 (September 2018)
Subjects:
variance swaps
term structure
variance risk premium
VIX futures
options
return predictability
Graue Literatur
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: 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.
Physical Description: 1 Online-Ressource (circa 66 Seiten); Illustrationen