The authors examine whether volatility risk is a priced risk factor in securities returns. Zero‐beta at‐the‐money straddle returns of the S&P 500 index are used to measure volatility risk. It is demonstrated that volatility risk captures time variation in the stochastic discount factor....

We introduce a new methodology to categorize institutional herding tendency and direction, that enhances the precision with which herders are identified at the institutional level. The herders are the ones that follow the crowd both on the buy and sell trades, whereas anti-herders are the...

This study examines the impact of foreign currency market interventions of the Central Bank of Turkey (CBT) in a multivariate GARCH framework. CBT has switched to the floating exchange rate regime since 2001 crisis and announced that the interventions in the foreign exchange markets are aimed at...

The Black-Scholes pricing errors are larger in the deeper out-of-the-money options relative to the near out-of-the-money options, and mispricing worsens with increased volatility. Our results indicate that the Black-Scholes model is not the proper pricing tool in high volatility situations...

This paper examines the impact of macroeconomic announcements on the high-frequency behavior of the observed implied volatility skew of S&P 500 index options and VIX. We document that macroeconomic announcements affect VIX significantly and slope at a lesser extent. We also find evidence that...