TY  - UNPD
A1  - Huang, Darien
A1  - Schlag, Christian
A1  - Shaliastovich, Ivan
A1  - Thimme, Julian
T1  - Volatility-of-volatility risk
T2  - SAFE working paper series ; No. 210
N2  - We show that time-varying volatility of volatility is a significant risk factor which affects the cross-section and the time-series of index and VIX option returns, beyond volatility risk itself. Volatility and volatility-of-volatility measures, identified model-free from the option price data as the VIX and VVIX indices, respectively, are only weakly related to each other. Delta-hedged index and VIX option returns are negative on average, and are more negative for strategies which are more exposed to volatility and volatility-of-volatility risks. Volatility and volatility of volatility significantly and negatively predict future delta-hedged option payoffs. The evidence is consistent with a no-arbitrage model featuring time-varying market volatility and volatility-of-volatility factors, both of which have negative market price of risk.
T3  - SAFE working paper - 210 
KW  - volatility of volatility
KW  - hedging errors
KW  - isk premiums
Y1  - 2018
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/46676
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-466768
UR  - https://ssrn.com/abstract=3183610
IS  - May 2018
PB  - SAFE
CY  - Frankfurt am Main
ER  -