Dynamics of variance risk premia: A new model for disentangling the price of risk
方差风险溢价动态:分离风险价格的新模型
This paper formulates a new dynamic model for the variance risk premium based on a state space representation of a bivariate system for the observable ex-post realized variance and the ex-ante option implied variance expectation. A regime switching structure accommodates for periods of unusually high volatility, heterogeneous dynamics and changes in the dependence between the latent states. The model allows separating the continuous component of the variance risk premium…