The Price of Macroeconomic Uncertainty: Evidence from Daily Option Expirations
Abstract/Contents
- Abstract
- Using recently available daily S&P 500 index option expirations, we examine the ex ante pricing of uncertainty surrounding key economic releases and the determinants of risk premia associated with these releases. The cost of insurance against price, variance, and downside risk is higher for options that span U.S. CPI, FOMC, Nonfarm Payroll, and GDP releases compared to neighboring expirations. We calculate release-driven forward equity and variance risk premia and find that premia vary considerably across economic releases and increase with risk aversion as well as with monetary policy and real economic uncertainty. The empirical framework presented in this paper can be used to examine the ex ante pricing of a wide variety of events.
Description
Type of resource | text |
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Date created | September 6, 2023 |
Creators/Contributors
Author | Samadi, Mehrdad |
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Author | Londono, Juan |
Organizer of meeting | Bloom, Nicholas |
Organizer of meeting | Davis, Steven |
Organizer of meeting | Fernandez-Villaverde, Jesus |
Organizer of meeting | Liu, Zheng |
Organizer of meeting | Sun, Bo |
Organizer of meeting | Xu, Nancy |
Subjects
Subject | Variance Risk |
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Subject | Uncertainty |
Subject | Risk premium |
Subject | Macroeconomic Releases |
Subject | FOMC |
Subject | Inflation |
Subject | Tail Risk |
Genre | Grey literature |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Samadi , M. and Londono, J. (2023). The Price of Macroeconomic Uncertainty: Evidence from Daily Option Expirations. Stanford Digital Repository. Available at https://purl.stanford.edu/rn650jw2470. https://doi.org/10.25740/rn650jw2470.
Collection
SITE Conference 2023
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