IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v61y2026i3p1036-1072_1.html

The Crash Risk in Individual Stocks Embedded in Skewness Swap Returns

Author

Listed:
  • Pederzoli, Paola

Abstract

This article investigates crash risk premiums in individual stocks using skewness swaps. These swaps involve buying a stock’s risk-neutral skewness and receiving the realized skewness as a payoff. The strategy’s returns, which measure the skewness risk premium, are found to be consistently large and positive. This suggests investors are concerned about potential crashes in individual stocks and require substantial compensation for bearing this risk. Notably, significant results are mainly observed after the 2007/2009 financial crisis, indicating changes in post-crisis option market dynamics. Cross-sectional determinants of skewness swap returns include measures of systematic crash risk and stock overvaluation.

Suggested Citation

  • Pederzoli, Paola, 2026. "The Crash Risk in Individual Stocks Embedded in Skewness Swap Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 61(3), pages 1036-1072, May.
    • Handle: RePEc:cup:jfinqa:v:61:y:2026:i:3:p:1036-1072_1
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109025102445/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    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:cup:jfinqa:v:61:y:2026:i:3:p:1036-1072_1. 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: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    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.