Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...

In this paper, we examine the effects of expected and surprise components in Federal funds target rate changes on realized and implied volatility. We find that surprise changes in the target rate significantly increase volatility. Consistent with the efficient market hypothesis, our analysis...

Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors. When the hedge is performed under the ideal conditions of continuous trading and correct model specification, the sign of the premium is the same as the sign of the mean hedging...

We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic triggered by big negative stock returns. The stochastic variance and jump intensity, and their risk premium are estimated jointly from daily stock returns and option data over...

We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic triggered by big negative stock returns. The stochastic variance and jump intensity, and their risk premium are estimated jointly from daily stock returns and option data over...

The authors examine the advantages of incorporating strategic exposure to equity volatility into the investment opportunity set of a long-term equity investor. They consider two standard volatility investments: implied volatility and volatility risk premium strategies. An analytical framework,...

We seek the roots of one-minute changes in VIX, an index of S&P 500 option prices, to understand risk neutral volatility and its risk premium component. Beyond leverage and risk premium effects, macroeconomic influences and some proxies for noise trading in the S&P 500 ETF market are...

This paper examines the advantages of incorporating strategic exposure to equity volatility into the investment-opportunity set of a long-term equity investor. We consider two standard volatility investments: implied volatility and volatility risk premium strategies. To calibrate and assess the...

Tests for the existence and the sign of the volatility risk premium are often based on expected option hedging errors. When the hedge is performed under the ideal conditions of continuous trading and correct model specification, the sign of the premium is the same as the sign of the mean hedging...