The cross-sectional variation of volatility risk premia
Ana González-Urteaga and
Journal of Financial Economics, 2016, vol. 119, issue 2, 353-370
This paper analyzes the determinants of the cross-sectional variation of the average volatility risk premia for a representative set of portfolios sorted by volatility risk premium beta. The market volatility risk premium and, especially, the default premium are shown to be key risk factors in the cross-sectional variation of average volatility risk premium payoffs. The cross-sectional variation of risk premia seems to reflect a very different behavior of the underlying components of our sample portfolios with respect to credit or financial stress that generates a significant dispersion of the volatility swap pricing of these securities.
Keywords: Volatility risk premia; Stochastic discount factor; Consumption-based models; Linear factor models; Default premium (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:2:p:353-370
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