Cao, Jie
[Verfasser:in]
;
Vasquez, Aurelio
[Sonstige Person, Familie und Körperschaft];
Xiao, Xiao
[Sonstige Person, Familie und Körperschaft];
Zhan, Xintong
[Sonstige Person, Familie und Körperschaft]
Volatility Uncertainty and the Cross-Section of Option Returns
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 24, 2019 erstellt
Beschreibung:
This paper studies the relation between the uncertainty of volatility, measured as the volatility of volatility, and future delta-hedged equity option returns. We find that delta-hedged option returns consistently decrease in uncertainty of volatility. Our results hold for different measures of volatility such as implied volatility, EGARCH volatility from daily returns, and realized volatility from high-frequency data. The results are robust to firm characteristics, stock and option liquidity, volatility characteristics, and jump risks, and are not explained by common risk factors. Our findings suggest that option dealers charge a higher premium for single-name options with high uncertainty of volatility, because these stock options are more difficult to hedge