Event-day Options / Jonathan H. Wright.

Format:

Book

Author/Creator:

Wright, Jonathan H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28306.

NBER working paper series no. w28306

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This paper considers new options on Treasury and stock futures than expire each Wednesday and Friday. I examine the volatilities implied by these options as of the night before expiration, and compare the volatilies just before FOMC days and employment report days with the volatilities on other Tuesdays or Thursdays, respectively. This can be used to measure the risk neutral uncertainty associated with FOMC announcements and employment reports. I can also compare the average physical and risk neutral uncertainty: the difference between them is the average variance risk premium. Average variance risk premia are large and significantly positive, especially for FOMC days. Lastly, I construct options-implied densities on the eve of FOMC and employment report days.

Notes:

Print version record

December 2020.