Event-day Options

Jonathan Wright

No 28306, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper considers new options on Treasury and stock futures than expire each Wednesday and Friday. I examine the volatilities implied by these options as of the night before expiration, and compare the volatilies just before FOMC days and employment report days with the volatilities on other Tuesdays or Thursdays, respectively. This can be used to measure the risk neutral uncertainty associated with FOMC announcements and employment reports. I can also compare the average physical and risk neutral uncertainty: the difference between them is the average variance risk premium. Average variance risk premia are large and significantly positive, especially for FOMC days. Lastly, I construct options-implied densities on the eve of FOMC and employment report days.

JEL-codes: C22 E43 E52 G14 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-mac
Note: AP ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w28306.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:28306

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28306

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().