We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the … time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility … volatility and volatility-of-volatility risks. Volatility and volatility of volatility significantly and negatively predict …

We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the … time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility … featuring time-varying market volatility and volatility-of-volatility factors, both of which have negative market price of risk …

almost half of the implied volatility skew can be explained by the skew risk premium. We provide evidence that skew and …We measure the skew risk premium in the equity index market through the skew swap. We argue that just as variance swaps … skew swaps be used to explore the relationship between the skew in implied volatility and realized skew. Like the variance …

index time series and options data, we extract volatility risk and risk premium from the volatility surfaces, and find that … positions. The framework starts with the near-term dynamics of the implied volatility surface and derives no … volatilities can also be constructed specific to, and different across, option contracts. Applying the new theory to the S&P 500 …

, such as the market excess return, size, book-to-market, momentum, liquidity, market volatility, and the variance risk … VIX slope risk is approximately 2.5% annually, statistically significant and cannot be explained by other common factors …

We find that interest rate variance risk premium (IRVRP) - the difference between implied and realized variances of … horizons up to six months. IRVRP is not subsumed by other predictors such as forward rate spread or equity variance risk … long-run risk, economic uncertainty, and inflation non-neutrality. In the model IRVRP is related to short-run risk only …

variance premium, the prices of equity index options, and the prices of volatility related derivatives in a long-run risks … of variance risk while remaining consistent with consumption and asset pricing data. The variance premium is mainly … driven by the risk of a sudden increase in the overall level of uncertainty. Out-of-the-money equity index put options and …

investment risk, creating profitable trading opportunities. Falling hedging demand helps explain this behavior, as premiums and …Ex-ante estimates of the volatility premium embedded in VIX futures, known as the VIX premium, fall or stay flat when … ex-ante measures of risk rise. This is not an artifact of mismeasurement: 1) Ex-ante premiums reliably predict ex …

hedging errors. In the empirical application, we synthesize the prices of the variance contract on S&P 500 index over the … period from 01/1990 to 12/2009. We find that the market variance risk is priced, its risk premium is negative and … economically very large. The variance risk premium cannot be explained by the known risk factors and option returns …