Dotsis, George and Vlastakis, Nikolaos (2016) Corridor Volatility Risk and Expected Returns. Journal of Futures Markets, 36 (5). pp. 488-505. DOI https://doi.org/10.1002/fut.21738
Dotsis, George and Vlastakis, Nikolaos (2016) Corridor Volatility Risk and Expected Returns. Journal of Futures Markets, 36 (5). pp. 488-505. DOI https://doi.org/10.1002/fut.21738
Dotsis, George and Vlastakis, Nikolaos (2016) Corridor Volatility Risk and Expected Returns. Journal of Futures Markets, 36 (5). pp. 488-505. DOI https://doi.org/10.1002/fut.21738
Abstract
This paper examines the pricing of volatility risk using SPX corridor implied volatility. We decompose model-free implied volatility into various components using different segments of the cross-section of out-of-the money put and call option prices. We find that only model-free volatility computed from the cross-section of out-of-the-money call option prices carries a significant negative risk premium in the cross-section of stock returns and subsumes all relevant information for forecasting future volatility. Our empirical results provide strong evidence that SPX out-of-the money put option prices do not contain useful information for pricing aggregate volatility risk in the cross-section of stock returns.
Item Type: | Article |
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School Faculty of Social Sciences > Essex Business School > Essex Accounting Centre |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 04 Sep 2015 10:50 |
Last Modified: | 23 Sep 2022 18:41 |
URI: | http://repository.essex.ac.uk/id/eprint/14770 |
Available files
Filename: corridorvolatility.pdf