Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146688
Authors: 
Van Tassel, Peter
Vogt, Erik
Year of Publication: 
2016
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 789
Abstract: 
Sellers of variance swaps earn time-varying risk premia for their exposure to realized variance, the level of variance swap rates, and the slope of the variance swap curve. To measure risk premia, we estimate a dynamic term structure model that decomposes variance swap rates into expected variances and term premia. Empirically, we document a strong global factor structure in variance term premia across the U.S., U.K., Europe, and Japan. We further show that variance term premia are negatively correlated with the risk appetite of hedge funds, broker-dealers, and mutual funds. Our results support the hypothesis that financial intermediaries are marginal investors in the variance swap market.
Subjects: 
variance swap
variance risk premium
term structure
empirical asset pricing
volatility
financial intermediaries
JEL: 
G12
G13
C58
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.