Implied risk aversion and volatility risk premiums

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dc.contributor.authorYoon, SunJoongko
dc.contributor.authorByun, Suk Joonko
dc.date.accessioned2013-04-29-
dc.date.available2013-04-29-
dc.date.created2013-04-01-
dc.date.created2013-04-01-
dc.date.issued2012-01-
dc.identifier.citationAPPLIED FINANCIAL ECONOMICS, v.22, no.1, pp.59 - 70-
dc.identifier.issn0960-3107-
dc.identifier.urihttp://hdl.handle.net/10203/173603-
dc.description.abstractSince investor risk aversion determines the premium required for bearing risk, a comparison thereof provides evidence of the different structure of risk premium across markets. This article estimates and compares the degree of risk aversion of three actively traded options markets: the S&P 500, Nikkei 225 and KOSPI 200 options markets. The estimated risk aversions is found to follow S&P 500, Nikkei 225 and KOSPI 200 options in descending order, implying that S&P 500 investors require more compensation than other investors for bearing the same risk. To prove this empirically, we examine the effect of risk aversion on volatility risk premium, using delta-hedged gains. Since more risk-averse investors are willing to pay higher premiums for bearing volatility risk, greater risk averseness can result in a severe negative volatility risk premium, which is usually understood as hedging demands against the underlying asset's downward movement. Our findings support the argument that S&P 500 investors with higher risk aversion pay more premiums for hedging volatility risk. © 2012 Taylor & Francis.-
dc.languageEnglish-
dc.publisherChapman & Hall-
dc.titleImplied risk aversion and volatility risk premiums-
dc.typeArticle-
dc.identifier.scopusid2-s2.0-80053257948-
dc.type.rimsART-
dc.citation.volume22-
dc.citation.issue1-
dc.citation.beginningpage59-
dc.citation.endingpage70-
dc.citation.publicationnameAPPLIED FINANCIAL ECONOMICS-
dc.contributor.localauthorByun, Suk Joon-
dc.contributor.nonIdAuthorYoon, SunJoong-
dc.subject.keywordAuthorKOSPI 200 index options-
dc.subject.keywordAuthorNikkei 225 index options-
dc.subject.keywordAuthorRisk aversion-
dc.subject.keywordAuthorS and P 500 index options-
dc.subject.keywordAuthorVolatility risk premium-
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MT-Journal Papers(저널논문)
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