Buraschi, Andrea, Trojani, Fabio and Vedolin, Andrea (2011) When uncertainty blows in the orchard: comovement and equilibrium volatility risk premia. EFA 2009 Bergen meetings paper. SSRN.
Full text not available from this repository.Abstract
We produce novel evidence for an equilibrium link between investors' disagreement, the market price of volatility and correlation risk, and the differential pricing of index and individual equity options. We show that belief disagreement is positively related to (i) the wedge between index and individual volatility risk premia, (ii) the different slope of the smile of index and individual options and (iii) the correlation risk premium. Priced disagreement risk also explains returns of option volatility and correlation trading strategies in a way that is robust to the inclusion of other risk factors and different market conditions.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Official URL: | http://papers.ssrn.com/sol3/JELJOUR_Results.cfm?fo... |
| Additional Information: | © 2011 The authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing |
| Date Deposited: | 16 Apr 2012 10:36 |
| Last Modified: | 11 Dec 2024 19:05 |
| URI: | http://eprints.lse.ac.uk/id/eprint/43093 |
Actions (login required)
 |
View Item |
