FRIC/Finance Seminar with Stefano Giglio, Chicago Booth

Upcoming Seminar with Stefano Giglio, Booth School of Business, University of Chicago

 
Friday, May 29, 2015 - 11:00 to 12:15

FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Stefano Giglio, Booth School of Business, University of Chicago.

Stefano Giglio will present:

PDF iconThe price of variance risk


Authors:

Ian Dew-Becker, Northwestern University, Kellogg School of Management
Stefano Giglio, Booth School of Business, University of Chicago
Anh Le, UNC Kenan-Flagler Business School
Marius Rodriguez, Federal Reserve Board

 

Abstract:

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 structural models of the variance risk premium, such as the intertemporal CAPM, recent models with Epstein-Zin preferences and long-run risks, and models where institutional investors have value-at-risk constraints. The results also have strong implications for macro models where volatility affects investment decisions, suggesting that investors are not willing to pay to hedge shocks in expected economic uncertainty.

The page was last edited by: Department of Finance // 05/12/2015