Implicit Subsidy

Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....

There is often a strong case for hedging FX carry trades against unrelated global market factors. It is usually not difficult to hedge currency...

FX forward-implied carry is a valid basis for investment strategies because it is related to policy subsidies and risk premia. However, it also contains...

Implicit subsidies in financial markets can be defined as expected returns over and above the risk free rate and conventional risk premia. While conventional...

A new paper combines two key aspects of commodity pricing: a rational pricing model based on the present value of future convenience yields...

Empirical evidence for 27 markets suggests that carry on interest rate swaps has been positively correlated with subsequent returns for the past two decades....

The correlation risk premium is a premium for uncertainty of future correlation of securities among each other or with a benchmark. A rise in...

An empirical paper suggests that the risk premium and excess return on gold have been time-varying and predictable, also out-of-sample. The key predictors have...

The variance risk premium of an asset is the difference between options-implied and actual expected return variation. It can be viewed as a price...

There are two reasons why macro traders watch risk perceptions. First, sudden spikes often trigger subsequent flows and macroeconomic change. Second, implausibly high or...