Identifying Volatility Risk Premia from Fixed Income Asian Options

2008 ◽  
Author(s):  
Caio Almeida ◽  
Jose Vicente
Keyword(s):  
Risk Premia ◽  
Asian Options ◽  
Fixed Income ◽  
Volatility Risk

scholarly journals Optimal Option Portfolio Strategies: Deepening the Puzzle of Index Option Mispricing

2017 ◽  
Vol 52 (1) ◽  
pp. 277-303 ◽  
Author(s):  
José Afonso Faias ◽  
Pedro Santa-Clara
Keyword(s):  
Asset Allocation ◽  
Risk Premia ◽  
Volatility Risk ◽  
Short Sample ◽  
Option Returns ◽  
Portfolio Strategies ◽  
Portfolio Strategy ◽  
Out Of Sample ◽  
Index Option ◽  
Mean Variance

Traditional methods of asset allocation (such as mean–variance optimization) are not adequate for option portfolios because the distribution of returns is non-normal and the short sample of option returns available makes it difficult to estimate their distribution. We propose a method to optimize a portfolio of European options, held to maturity, with a myopic objective function that overcomes these limitations. In an out-of-sample exercise incorporating realistic transaction costs, the portfolio strategy delivers a Sharpe ratio of 0.82 with positive skewness. This performance is mostly obtained by exploiting mispricing between options and not by loading on jump or volatility risk premia.

Information Content of Adjusted Implied Volatility in the KOSPI 200 Index Options Market

2009 ◽  
Vol 17 (4) ◽  
pp. 75-103
Author(s):  
Byung Jin Kang ◽  
Sohyun Kang ◽  
Sun-Joong Yoon
Keyword(s):  
Implied Volatility ◽  
Risk Premia ◽  
Risk Averse ◽  
Options Market ◽  
Jump Risk ◽  
Index Options ◽  
Volatility Risk ◽  
Model Free ◽  
Volatility Model ◽  
Forecasting Errors

This study examines the forecasting ability of the adjusted implied volatility (AIV), which is suggested by Kang, Kim and Yoon (2009), using the horserace competition with historical volatility, model-free implied volatility, and BS implied volatility in the KOSPI 200 index options market. The adjusted implied volatility is applicable when investors are not risk averse or when underlying returns do not follow a normal distribution. This implies that AIV is consistent with the presence of risk premia for other risk such as volatility risk and jump risk. Using KOSPI 200 index options, it is shown that the AIV outperforms other volatility estimates in terms of the unbiasedness for future realized volatilities as well as the forecasting errors.

Comovement and Volatility Risk Premia

2009 ◽  
Author(s):  
Andrea Buraschi ◽  
Fabio Trojani ◽  
Andrea Vedolin
Keyword(s):  
Risk Premia ◽  
Volatility Risk

Estimating Risk Premia in Fixed Income Markets

2007 ◽  
Author(s):  
Peter Christoffersen ◽  
Kris Jacobs ◽  
Lotfi Karoui ◽  
Karim Mimouni
Keyword(s):  
Risk Premia ◽  
Fixed Income ◽  
Fixed Income Markets
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