IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v58y2023ipas1544612323006840.html
   My bibliography  Save this article

Variance risk premiums and aging firms

Author

Listed:
  • Neururer, Thaddeus

Abstract

In this paper, I investigate how variance risk premiums change as firms age. Negative variance risk premiums represent profits that, on average, accrue to traders willing to sell option protection to other investors. Although typical risk measures decrease as firms age, my results suggest that as firms become older their variance risk premiums decrease. This effect is not explained by option-implied risk measures, fundamental factors, and an option mispricing proxy. This result is also robust across several sample splits based on option market liquidity and the result is not explained by initial public offerings.

Suggested Citation

  • Neururer, Thaddeus, 2023. "Variance risk premiums and aging firms," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006840
    DOI: 10.1016/j.frl.2023.104312
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323006840
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.104312?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Options; Firm age; Implied volatilities; Variance risk premiums; Risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006840. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.