We estimate the term structure of the price of variance risk (PVR), which helps distinguish between competing asset-pricing theories. First, we measure the PVR as proportional to the Sharpe ratio of short-term holding returns of delta-neutral index straddles; second, we estimate the PVR in a...

Spearman's rank correlation is a robust alternative for the standard correlation coefficient. By using ranks instead of the actual values of the observations, the impact of outliers remains limited. In this paper, we study an estimator based on this rank correlation measure for estimating...

The well-known approximation of the difference between the arithmetic average and geometric average returns as one-half of the variance of the underlying returns is reexamined using Jensen's Inequality. The "defect" in Jensen's Inequality, is given an exlicit formula in terms of the variance...

In the period 1996-2014, the average investor in the variance swap market was indifferent to news about future variance at horizons ranging from 1 month to 14 years. It is only purely transitory and unexpected realized variance that were priced. These results present a challenge to most...

We derive efficient and accurate analytic approximation formulas for pricing options on discrete realized variance (DRV) under affine stochastic volatility models with jumps using the partially exact and bounded (PEB) approximations. The PEB method is an enhanced extension of the conditioning...

This paper proposes the spectral corrected methodology to estimate the Global Minimum Variance Portfolio (GMVP) for the high dimensional data. In this paper, we analysis the limiting properties of the spectral corrected GMVP estimator as the dimension and the number of the sample set increase to...