Bakshi, Gurdip; Madan, Dilip - In: Management Science 52 (2006) 12, pp. 1945-1956
This study formalizes the departure between risk-neutral and physical index return volatilities, termed volatility … spreads. Theoretically, the departure between risk-neutral and physical index volatility is connected to the higher … investors are risk averse, and when the physical index distribution is negatively skewed and leptokurtic. Our empirical evidence …