File Download
Supplementary
-
Citations:
- Appears in Collections:
Conference Paper: The relation between physical and risk-neutral cumulants
Title | The relation between physical and risk-neutral cumulants |
---|---|
Authors | |
Keywords | Skewness swap Kurtosis swap Equity risk premium Skewness risk premium Variance risk premium Kurtosis risk premium |
Issue Date | 2009 |
Publisher | Financial Management Association. |
Citation | The 2009 Annual Meeting of the Financial Management Association (FMA), Reno, NV., 21-24 October 2009. How to Cite? |
Abstract | Variance swaps are natural instruments for investors taking directional bets on volatility and are often used for portfolio protection. But the crucial observation suggests that derivative professionals may desire to hedge beyond volatility risk and there exists the need to hedge higher-moment market risks, such as skewness and kurtosis risks. We propose new derivative contracts: skewness swap and kurtosis swap, which trade the forward realized third and fourth cumulants. Using S&P 500 index options data from 1996 to 2005, we document the returns of these swap contracts, i.e., skewness risk premium and kurtosis risk premium. We find that the skewness risk premium is significantly negative and kurtosis risk premium for 90 day maturity is significantly positive. |
Persistent Identifier | http://hdl.handle.net/10722/114912 |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Chang, EC | en_HK |
dc.contributor.author | Zhang, EJ | en_HK |
dc.contributor.author | Zhao, H | en_HK |
dc.date.accessioned | 2010-09-26T05:21:38Z | - |
dc.date.available | 2010-09-26T05:21:38Z | - |
dc.date.issued | 2009 | en_HK |
dc.identifier.citation | The 2009 Annual Meeting of the Financial Management Association (FMA), Reno, NV., 21-24 October 2009. | - |
dc.identifier.uri | http://hdl.handle.net/10722/114912 | - |
dc.description.abstract | Variance swaps are natural instruments for investors taking directional bets on volatility and are often used for portfolio protection. But the crucial observation suggests that derivative professionals may desire to hedge beyond volatility risk and there exists the need to hedge higher-moment market risks, such as skewness and kurtosis risks. We propose new derivative contracts: skewness swap and kurtosis swap, which trade the forward realized third and fourth cumulants. Using S&P 500 index options data from 1996 to 2005, we document the returns of these swap contracts, i.e., skewness risk premium and kurtosis risk premium. We find that the skewness risk premium is significantly negative and kurtosis risk premium for 90 day maturity is significantly positive. | - |
dc.language | eng | en_HK |
dc.publisher | Financial Management Association. | - |
dc.relation.ispartof | Annual Meeting of the Financial Management Association | en_HK |
dc.subject | Skewness swap | - |
dc.subject | Kurtosis swap | - |
dc.subject | Equity risk premium | - |
dc.subject | Skewness risk premium | - |
dc.subject | Variance risk premium | - |
dc.subject | Kurtosis risk premium | - |
dc.title | The relation between physical and risk-neutral cumulants | en_HK |
dc.type | Conference_Paper | en_HK |
dc.identifier.email | Chang, EC: ecchang@business.hku.hk | en_HK |
dc.identifier.email | Zhang, EJ: jinzhang@hku.hk | en_HK |
dc.identifier.email | Zhao, H: zhaohm@gmail.com | en_HK |
dc.identifier.authority | Chang, EC=rp01050 | en_HK |
dc.identifier.authority | Zhang, EJ=rp01125 | en_HK |
dc.description.nature | postprint | - |
dc.identifier.hkuros | 168637 | en_HK |
dc.description.other | The 2009 Annual Meeting of the Financial Management Association (FMA), Reno, NV., 21-24 October 2009. | - |