Biblioteca de la Universidad Complutense de Madrid

Why do variance swaps exist?

Impacto



Nieto, Belén y Novales Cinca, Alfonso y Rubio, Gonzalo (2011) Why do variance swaps exist? [ Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 06, 2011, ] (No publicado)

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URL Oficial: http://eprints.ucm.es/12520/




Resumen

This paper studies the determinants of the variance risk premium and concludes on the hedging possibilities offered by variance swaps. We start by showing that the variance
risk premium responds to changes in higher order moments of the distribution of market returns. But the uncertainty that determines the variance risk premium –the fear by investors to deviations from Normality in returns- is also strongly related to a variety of risks: risk of default, employment growth risk, consumption growth risk, stock market risk and market illiquidity risk. Therefore, the variance risk premium could be interpreted as reflecting the market willingness to pay for hedging against financial and
macroeconomic sources of risk. We provide additional evidence in support of that view.


Tipo de documento:Documento de trabajo o Informe técnico
Información Adicional:

JEL classification: C13, C14, G10, G12

Palabras clave:Variance risk premium, Non-normality, Economic risks, Hedging
Materias:Ciencias Sociales > Economía > Econometría
Ciencias Sociales > Economía > Macroeconomía
Título de serie o colección:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volumen:2011
Número:06
Código ID:12520
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Depositado:04 Abr 2011 08:44
Última Modificación:12 Mar 2014 10:52

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