Variance risk in commodity markets

Prokopczuk, Marcel, Symeonidis, Lazaros and Wese Simen, Chardin (2017) Variance risk in commodity markets. Journal of Banking and Finance, 81. 136–149. ISSN 0378-4266

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We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document comovements between the realized payoffs of commodity, equity and bond variance swaps. Similar results hold for expected variance swap payoffs. Furthermore, we show that both realized and expected commodity variance swap payoffs are distinct from the realized and expected commodity futures returns, indicating that variance risk is unspanned by commodity futures.

Item Type: Article
Uncontrolled Keywords: commodities,variance risk premia,variance swaps
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Groups > Accounting, Finance and Governance (former - to 2017)
Faculty of Social Sciences > Research Groups > Finance Group
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Depositing User: Pure Connector
Date Deposited: 18 May 2017 05:06
Last Modified: 21 Oct 2022 12:30
DOI: 10.1016/j.jbankfin.2017.05.003


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