On the Term Structure of Model-Free Volatilities and Volatility Risk Premium
We present an improved method to obtain the model-free volatility more accurately despite the limitations of a small number of options and a large interval of strike prices. The method enables a study of the term structure of model-free volatilities over a long horizon for the first time. We apply the method on the European-style S&P 100 index options and find that the model-free volatilities are (i) asymmetrically more correlated with a negative change in the index level at the near term as anticipated, but at the far term, they are asymmetrically more correlated with a positive change; (ii) larger when the volatility term structure is downward sloping, and vice versa; (iii) much larger than the realized volatilities at the near term than at the far term, implying that buyers of variance swaps with longer maturities can hedge against a spike in volatility more effectively; (iv) meanreverting, and this stochastic behavior is tested to be consistent with the Heston (1993) model.
Model-free volatility realized volatility volatility risk premium term structure option
国际会议
大连
英文
1-52
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）