Feunou, B. and Fontaine, J.S. and Taamouti, A. and Tédongap, R. (2014) 'Risk premium, variance premium, and the maturity structure of uncertainty.', Review of finance., 18 (1). pp. 219-269.
Structural or no-arbitrage asset-pricing models emphasize risk factors that cannot be observed directly. We show that the term structure of risk implicit in option prices can reveal these risk factors. Empirically, the variance term structure reveals two predictors of the bond premium, the equity premium, and the variance premium, jointly. Similarly, the term structures of skewness and kurtosis measures also reveal risk factors, but these are subsumed in the predictive content of the variance. The predicted premium is countercyclical and robust to the inclusion of known returns predictors.
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|Publisher Web site:||http://dx.doi.org/10.1093/rof/rft004|
|Publisher statement:||This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version Feunou, B., Fontaine, J.S., Taamouti, A. and Tédongap, R. (2014) 'Risk premium, variance premium, and the maturity structure of uncertainty.', Review of finance., 18 (1): 219-269 is available online at: http://dx.doi.org/10.1093/rof/rft004|
|Record Created:||07 Nov 2014 10:20|
|Last Modified:||22 Mar 2015 00:30|
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