Analyzing volatility risk and risk premium in option contracts: A new theory

• 成果类型: Article
• 署名作者: Carr, Peter; Wu, Liuren
• 署名单位: New York University; City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.01.004
• 发表日期: 2016
• 页码: 1-20
• 关键词: Implied volatility surface; Option realized volatility; Expected volatility surface; Volatility risk premium; Vega-gamma-vanna-volga; Proportional variance dynamics

摘要

We develop a new option pricing framework that tightly integrates with how institutional investors manage options positions. The framework starts with the near-term dynamics of the implied volatility surface and derives no-arbitrage constraints on its current shape. Within this framework, we show that just like option implied volatilities, realized and expected volatilities can also be constructed specific to, and different across, option contracts. Applying the new theory to the S&P 500 index time series and options data, we extract volatility risk and risk premium from the volatility surfaces, and find that the extracted risk premium significantly predicts future stock returns. (C) 2016 Elsevier B.V. All rights reserved.