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Elise GOURIER (Queen Mary University of London) – “Inferring Volatility Dynamics and Risk Premia From the S&P 500 and VIX Markets”

November 16, 5:30 pm - 6:30 pm

FINANCIAL ECONOMETRICS SEMINAR

Time: 17:30 pm – 18:30 pm
Date: 16th of Novembre 2017
Place: Room 3001.

Elise GOURIER (Queen Mary University of London) – “”Inferring Volatility Dynamics and Risk Premia From the S&P 500 and VIX Markets”.

Abstract:

This paper shows that the VIX market contains information on the variance of the S&P 500 returns, which is not already spanned by the S&P 500 market. We estimate a flexible affine model based on joint time series of underlying indexes and option prices on both markets. We find that including VIX option prices in the model estimation allows better identification of the parameters driving the risk-neutral conditional distributions and term structure of volatility, thereby enhancing the estimation of the variance risk premium. We gain new insights on the properties of the premium’s term structure and highlight two economic implications. First, we show how these properties can be used to form trading signals. Second, we show that our premium, used together with a measure of its term structure, has better predictive power on S&P 500 returns compared to the usual model-free premium.

 

Organizers:
Jean-Michel ZAKOIAN (CREST )

Sponsors:
CREST and ILB

Location:
Address
 : ENSAE ParisTech
5, avenue Henry Le Chatelier
91120 Palaiseau
How to come?

 

Details

Date:
November 16
Time:
5:30 pm - 6:30 pm
Event Categories:
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Venue