Implied risk aversion and volatility risk premiums

2011 ◽  
Vol 22 (1) ◽  
pp. 59-70 ◽  
Author(s):  
Sun-Joong Yoon ◽  
Suk Joon Byun
Keyword(s):  
Risk Aversion ◽  
Volatility Risk ◽  
Risk Premiums

scholarly journals The implications of first-order risk aversion for asset market risk premiums

1997 ◽  
Vol 40 (1) ◽  
pp. 3-39 ◽  
Author(s):  
Geert Bekaert ◽  
Robert J. Hodrick ◽  
David A. Marshall
Keyword(s):  
Risk Aversion ◽  
Market Risk ◽  
Asset Market ◽  
Risk Premiums ◽  
First Order

Univariate and multivariate measures of risk aversion and risk premiums

1993 ◽  
Vol 45 (1) ◽  
pp. 265-296 ◽  
Author(s):  
Yuming Li ◽  
William T. Ziemba
Keyword(s):  
Risk Aversion ◽  
Risk Premiums ◽  
Measures Of Risk

Risk Premiums versus Waiting-Options Premiums: A Simple Numerical Example

2009 ◽  
Vol 9 (1) ◽  
Author(s):  
Kenji Miyazaki ◽  
Makoto Saito
Keyword(s):  
Risk Aversion ◽  
Interest Rates ◽  
Excess Returns ◽  
Intertemporal Substitution ◽  
Informative Signal ◽  
Risky Assets ◽  
Risk Premiums ◽  
Numerical Examples ◽  
Numerical Example ◽  
New Information

This paper investigates how interest rates on liquid assets and excess returns on risky assets are determined when only safe assets can be used as liquid assets when waiting for an informative signal of future payoffs. In particular, we carefully differentiate between a demand for liquid assets while waiting for new information and a demand for safe assets for precautionary reasons. Employing Kreps--Porteus preferences, numerical examples demonstrate that larger waiting-options premiums (lower interest rates) emerge with higher risk aversion in combination with more elastic intertemporal substitution.

scholarly journals Stochastic Volatility in General Equilibrium

2011 ◽  
Vol 01 (04) ◽  
pp. 707-731 ◽  
Author(s):  
George Tauchen
Keyword(s):  
Stock Market ◽  
General Equilibrium ◽  
A Priori ◽  
Market Volatility ◽  
Elasticity Of Substitution ◽  
Stock Market Volatility ◽  
Volatility Risk ◽  
Risk Premiums ◽  
Volatility Asymmetry ◽  
Main Model

The connections between stock market volatility and returns are studied within the context of a general equilibrium framework. The framework rules out a priori any purely statistical relationship between volatility and returns by imposing uncorrelated innovations. The main model generates a two-factor structure for stock market volatility along with time-varying risk premiums on consumption and volatility risk. It also generates endogenously a dynamic leverage effect (volatility asymmetry), the sign of which depends upon the magnitudes of the risk aversion and the intertemporal elasticity of substitution parameters.

Profitability prospects, risk aversion and time preferences of soybean producers in the region of Santarém, Brazilian Amazon: perspectives for an ecological transition

2020 ◽  
pp. 1-9
Author(s):  
Gabriel Leblanc ◽  
Marc Lucotte ◽  
Frédéric Mertens ◽  
Charles Séguin
Keyword(s):  
Risk Aversion ◽  
Agricultural Practices ◽  
Brazilian Amazon ◽  
Time Preferences ◽  
Three Dimensions ◽  
Primary Data ◽  
Volatility Risk ◽  
Environmental Consequences ◽  
Ecological Transition

Abstract Reducing adverse environmental consequences of modern industrial agriculture requires an ecological transition of agricultural practices. An important determinant of adoption of new agricultural practices by producers is the perceived profitability of these practices. The profitability of ecological agricultural practices tends to rely on improved crop prices and reduced input use. Transition to such practices often entails increased profit volatility (risk) and long-term returns (temporal profile). Ideal candidates for transition would therefore be aware of the output price and input costs dimensions of their profitability, as well as willing to assume some risks and show patience to value long-term returns. We assessed the potential for such a transition along these three dimensions (profitability, risk aversion and time preferences) in a group of soybean producers in the agricultural frontier of the Brazilian Amazon. Primary data were collected using a questionnaire and economic tests in the region of Santarém (State of Pará, Brazil). We found that, while these producers have a low-risk aversion that could favor the adoption of new ecological practices, their focus on increasing yields to enhance profits and their high discount rates considerably reduces their propensity to adopt these practices.

scholarly journals Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

2014 ◽  
Vol 89 (5) ◽  
pp. 1579-1607 ◽  
Author(s):  
Mary E. Barth ◽  
Eric C. So
Keyword(s):  
Risk Premium ◽  
Earnings Announcements ◽  
Return Volatility ◽  
Volatility Risk ◽  
Risk Premiums ◽  
Market Return ◽  
Predictable Variation ◽  
Jel Classifications

ABSTRACT This study seeks to determine whether earnings announcements pose non-diversifiable volatility risk that commands a risk premium. We find that investors anticipate some earnings announcements to convey news that increases market return volatility and pay a premium to hedge this non-diversifiable risk. In particular, we find evidence of risk premiums embedded in prices of firms' traded options that are significantly positively associated with the extent to which the firms' earnings announcements pose non-diversifiable volatility risk. In addition, we find that volatility risk premiums are concentrated among bellwether firms and result in predictable variation in option straddle returns around earnings announcements. Taken together, our findings show that some earnings announcements pose non-diversifiable volatility risk that commands a risk premium. JEL Classifications: M41; G12; G13; G14

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