Corridor Volatility Risk and Expected Returns
George Dotsis and
Nikolaos Vlastakis ()
Journal of Futures Markets, 2016, vol. 36, issue 5, 488-505
This paper examines the pricing of volatility risk using SPX corridor implied volatility. We decompose model‐free implied volatility into various components using different segments of the cross‐section of out‐of‐the money put and call option prices. We find that only model‐free volatility computed from the cross‐section of out‐of‐the‐money call option prices carries a significant negative risk premium in the cross‐section of stock returns and subsumes all relevant information for forecasting future volatility. Our empirical results provide strong evidence that SPX out‐of‐the money put option prices do not contain useful information for pricing aggregate volatility risk in the cross‐section of stock returns. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 36:488–505, 2016
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:36:y:2016:i:5:p:488-505
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314
Access Statistics for this article
Journal of Futures Markets is currently edited by Robert I. Webb
More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().