The Price of Market Volatility Risk

2007 ◽  
Author(s):  
Jefferson Duarte ◽  
Christopher S. Jones
Keyword(s):  
Market Volatility ◽  
Volatility Risk

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.

scholarly journals Volatility-of-Volatility Risk

2018 ◽  
Vol 54 (6) ◽  
pp. 2423-2452 ◽  
Author(s):  
Darien Huang ◽  
Christian Schlag ◽  
Ivan Shaliastovich ◽  
Julian Thimme
Keyword(s):  
Risk Factor ◽  
Significant Risk ◽  
Significant Risk Factor ◽  
Market Volatility ◽  
Market Prices ◽  
Volatility Risk ◽  
Option Returns ◽  
Model Free ◽  
Volatility Index ◽  
Index Option

We show that market volatility of volatility is a significant risk factor that affects index and volatility index option returns, beyond volatility itself. The volatility and volatility of volatility indices, identified model-free as the VIX and VVIX, respectively, are only weakly related to each other. Delta-hedged index and VIX option returns are negative on average and are more negative for strategies that are more exposed to volatility and volatility-of-volatility risks. Further, volatility and volatility of volatility significantly negatively predict future delta-hedged option payoffs. The evidence suggests that volatility and volatility-of-volatility risks are jointly priced and have negative market prices of risk.

scholarly journals Real and gitopetical risks of the future accumulative level of pension insurance in Ukraine

2020 ◽  
Vol 93 (8) ◽  
pp. 13-20
Author(s):  
L. Zaburanna ◽  
◽  
I. Shubenko ◽  
I. Godniuk ◽  
◽  
...  
Keyword(s):  
Financial Market ◽  
Pension System ◽  
Legal Framework ◽  
Market Volatility ◽  
Pension Insurance ◽  
Volatility Risk ◽  
Administrative Costs ◽  
High Inflation Rate ◽  
Analysis And Synthesis ◽  
High Inflation

No decisive steps have been taken in Ukraine to introduce a cumulative level of pension provision. The significant number of risks is one of the reasons for this. The purpose of the article is to study the theoretical foundations of hypothetical and real risks of the cumulative level of the pension system in Ukraine, which is expected to be introduced. A number of methods were used in the study, including abstract-logical, methods of analysis and synthesis and comparative analysis. It is argued that the cumulative level of pension provision will be characterized by a number of real risks: organizational and managerial risk, risk of high administrative costs, risk of depreciation of pension savings, selective risk, and risk of insufficient contributions. Hypothetical risks include market volatility risk and criminal risk. The cumulative level of pension provision is significantly affected by the risk of depreciation of pension savings, because given the high inflation rate and devaluation of the national currency, one should not expect a decent level of pensions in the long term, even taking into account the investment component of the cumulative level. It has been established that the domestic legal framework does not specify a mechanism for protection against such a risk, which undermines credibility to the functioning of the entire cumulative component of the pension system. Selective risk and the risk of financial market volatility are closely related to financial market trends and, under adverse conditions, may manifest themselves in the investment component of pension savings. It has been determined that the mechanism for overcoming such risks has not been defined in regulatory legal acts yet. Jointly, these risks determine the lack of principal steps in the process of reforming the modern pension system. In the case of the introduction of the cumulative level of pension provision, a system should be provided to prevent the risks of depreciation of pension savings and selective risks. Further studies will address the mechanisms that can prevent or reduce selective risks and risks of depreciation of pension savings.

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