Cross-Section of Option Returns and the Volatility Risk Premium

2021 ◽  
Author(s):  
Simon Fritzsch ◽  
Felix Irresberger ◽  
Gregor N. F. Weiss
Keyword(s):  
Cross Section ◽  
Risk Premium ◽  
Volatility Risk ◽  
Volatility Risk Premium ◽  
Option Returns

scholarly journals Learning and forecasts about option returns through the volatility risk premium

2017 ◽  
Vol 82 ◽  
pp. 312-330 ◽  
Author(s):  
Alejandro Bernales ◽  
Louisa Chen ◽  
Marcela Valenzuela
Keyword(s):  
Risk Premium ◽  
Volatility Risk ◽  
Volatility Risk Premium ◽  
Option Returns

Determinants of the Index Straddle Returns

2013 ◽  
Vol 21 (4) ◽  
pp. 411-434
Author(s):  
Byung Jin Kang
Keyword(s):  
Risk Premium ◽  
Trading Strategies ◽  
Excess Returns ◽  
Index Options ◽  
Volatility Risk ◽  
Volatility Risk Premium ◽  
Theoretical View

This paper investigates ATM zero-beta straddle (i.e., ZBS) returns, one of the most widely used volatility trading strategies, and then examines the determinants of them. First, from a point of theoretical view, we find that the determinants of the ZBS returns without rebalancing are different from those with rebalancing. This means that most previous studies overlooking the return characteristics by difference of rebalancing frequency could result in misleading implications. Next, from a point of empirical view, we find that the negative excess returns are also obtained by taking a long position in ZBS on the KOSPI 200 index options, as in most other markets. Even though these negative excess returns are not strongly significant, but they are found to be closely related to the volatility risk premium.

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