The Price of Higher Order Catastrophe Insurance: The Case of VIX Options

• 成果类型: Article
• 署名作者: Eraker, Bjorn; Yang, Aoxiang
• 署名单位: Peking University Shenzhen Graduate School (PKU Shenzhen); Peking University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13182
• 发表日期: 2022
• 页码: 3289-3337
• 关键词: VOLATILITY-OF-VOLATILITY; risk premia; long-run; stochastic volatility; rare disasters; jumps; implicit; fears

摘要

We develop a tractable equilibrium pricing model to explain observed characteristics in equity returns, VIX futures, S&P 500 options, and VIX options data based on affine jump-diffusive state dynamics and representative agents endowed with Duffie-Epstein recursive preferences. Our calibrated model replicates consumption, dividends, and asset market data, including VIX futures returns, the average implied volatilities in SPX and VIX options, and first- and higher-order moments of VIX options returns. We document a time variation in the shape of VIX-option-implied volatility and a time-varying hedging relationship between VIX and SPX options that our model both captures.