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Ambiguity, long-run risks, and asset prices
Wei, Bin - 2021
I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...
Persistent link: https://www.econbiz.de/10012617667
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Option-implied information and predictability of extreme returns
Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013
We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...
Persistent link: https://www.econbiz.de/10010226098
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Variance risk premiums in foreign exchange markets
Ammann, Manuel; Buesser, Ralf - 2013
Based on the theory of static replication of variance swaps we assess the sign and magnitude of variance risk premiums … general shape of the implied volatility function of the corresponding currency pair. Overall, we conclude that there is a …
Persistent link: https://www.econbiz.de/10010410031
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Variance Risk Premia, Asset Predictability Puzzles, and Macroeconomic Uncertainty
Zhou, Hao - 2012
uncertainty and recursive utility function. Within such a framework, the negative volatility risk premium implied from option …
Persistent link: https://www.econbiz.de/10013117074
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Information Content in Sneer Asymmetry : An Application to OOS Implied Volatility Forecasting
Choi, Youngsoo - 2012
The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...
Persistent link: https://www.econbiz.de/10013097543
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FEER Index - Forecasting Extreme Events Risk
Kauffmann, Amitay - 2013
In 2008, the S&P500 aggregated a loss of 30.16% during three selected days. Unfortunately, benchmark risk measures didn't forecast these hazards. Consequently, we witness a growing interest in coherent risk measures, sensitive to high moments and heavy tail risk. Such measures were proposed by...
Persistent link: https://www.econbiz.de/10013090906
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Variance Risk Premia, Asset Predictability Puzzles, and Macroeconomic Uncertainty
Zhou, Hao - 2018
This paper reviews the predictability evidence of the variance risk premium: (1) it predicts significant positive risk premiums across equity, bond, currency, and credit markets; (2) the predictability peaks at a few month horizons and dies out afterwards; (3) such a short-run predictability is...
Persistent link: https://www.econbiz.de/10012940510
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Forecasting Market Index Volatility Using Ross-Recovered Distributions
Gagnon, Marie-Hélène - 2020
(S&P, FTSE, CAC, SMI and DAX), we separate option-implied volatility into Ross-recovered true expected volatility and a … risk preference factor. We investigate whether these factors perform better to forecast realized volatility if constructed … evidence of significantly improved realized volatility forecasts. Models using Ross-recovered value-weighted global measures of …
Persistent link: https://www.econbiz.de/10012851207
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Why Do Price and Volatility Information from the Options Market Predict Stock Returns?
Muravyev, Dmitriy - 2020
The option implied volatility spread and skew predict stock returns. These variables also reflect the expected cost of … stock returns; however, the volatility spread and skew do not once this implied fee is considered. Results are similar for a … yet in stock prices. These findings indicate that the volatility spread and skew predict returns because they proxy for …
Persistent link: https://www.econbiz.de/10012855076