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Variance risk in commodity markets

Prokopczuk, Marcel and Symeonidis, Lazaros and Wese Simen, Chardin (2017) 'Variance risk in commodity markets.' Journal of Banking and Finance, 81. 136 - 149. ISSN 0378-4266

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Abstract

We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document comovements between the realized payoffs of commodity, equity and bond variance swaps. Similar results hold for expected variance swap payoffs. Furthermore, we show that both realized and expected commodity variance swap payoffs are distinct from the realized and expected commodity futures returns, indicating that variance risk is unspanned by commodity futures.

Item Type: Article
Uncontrolled Keywords: Commodities, Variance risk premia, Variance swaps
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 28 Jan 2020 13:26
Last Modified: 28 Jan 2020 14:15
URI: http://repository.essex.ac.uk/id/eprint/26589

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