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Volatility Forecasting and Time-varying Variance Risk Premiums in Grains Commodity Markets

Triantafyllou, Athanasios and Dotsis, George and Sarris, Alexandros H (2015) 'Volatility Forecasting and Time-varying Variance Risk Premiums in Grains Commodity Markets.' Journal of Agricultural Economics, 66 (2). 329 - 357. ISSN 0021-857X

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Abstract

In this paper we examine empirically the predictive power of model‐free option‐implied variance and skewness in wheat, maize and soybeans derivative markets. We find that option‐implied risk‐neutral variance outperforms historical variance as a predictor of future realised variance for these three commodities. In addition, we find that risk‐neutral option‐implied skewness significantly improves variance forecasting when added in the information variable set. Variance risk premia add significant predictive power when included as an additional factor for predicting future commodity returns.

Item Type: Article
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 29 Mar 2021 11:52
Last Modified: 29 Mar 2021 11:52
URI: http://repository.essex.ac.uk/id/eprint/30100

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