SSRN Author: Anthony NeubergerAnthony Neuberger SSRN Content
http://www.ssrn.com/author=59055
http://www.ssrn.com/rss/en-usSun, 05 Oct 2014 01:00:45 GMTeditor@ssrn.com (Editor)Sun, 05 Oct 2014 01:00:45 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: The Skew Risk Premium in the Equity Index MarketWe measure the skew risk premium in the equity index market through the skew swap. We argue that just as variance swaps can be used to explore the relationship between the implied variance in option prices and realized variance, so too can skew swaps be used to explore the relationship between the skew in implied volatility and realized skew. Like the variance swap, the skew swap corresponds to a trading strategy, necessary to assess risk premia in a model-free way. We find that almost half of the implied volatility skew can be explained by the skew risk premium. We provide evidence that skew and variance premia are manifestations of the same underlying risk factor in the sense that strategies designed to exploit one of the risk premia but to hedge out the other make zero excess returns.
http://www.ssrn.com/abstract=1571700
http://www.ssrn.com/1340652.htmlSat, 04 Oct 2014 12:28:10 GMT