Photo of Darien Huang

Darien Huang

Research Interests: asset pricing, derivatives markets, commodities markets, financial econometrics

Links: CV, Job Market Paper

Overview

Contact Information

   Phone: (267) 994-6883

   E-mail: darienh@wharton.upenn.edu

Research Interests

   Asset Pricing, Derivatives Markets, Commodities Markets, Financial Econometrics

Job Market Paper

Gold, Platinum, and Expected Stock Returns

I show that the ratio of gold to platinum prices (GP) reveals variation in risk and proxies for an important economic state variable.  GP predicts future stock returns in the time-series and explains variation in average stock returns in the cross-section.  GP outperforms existing predictors and similar patterns are found in international markets.  Contrary to conventional views of gold as a hedge, gold prices fall in recessions, albeit by less than platinum prices.  GP is persistent and significant correlated with option-implied tail risk measures.  An equilibrium model featuring recursive preferences, time-varying tail risk, and shocks to preferences for gold and platinum can quantitatively account for the asset pricing dynamics of equity, gold, and platinum markets, rationalize the return predictability, and explain why gold prices fall in bad times.

Education

   Ph.D., Finance, Wharton School, University of Pennsylvania, 2015 (expected)

   M.A., Statistics, Wharton School, University of Pennsylvania, 2013

   M.A., Finance, Wharton School, University of Pennsylvania, 2012

   B.S.Ec., Finance, Wharton School, University of Pennsylvania, 2008

   B.A., Mathematics and Economics, University of Pennsylvania, 2008

   Minor in Computer Science

Experience

   Analyst, Quantitative Trading, Goldman Sachs, 2008 - 2010

   Summer Analyst, Global Markets, Deutsche Bank, Summer 2007

References

Robert Morris Professor of Banking
Professor of Finance
The Wharton School
University of Pennsylvania
Phone: (215) 898-1241
Nippon Life Professor of Finance
Professor of Economics
The Wharton School
University of Pennsylvania
Phone: +44 (0)20 7594-9195
Assistant Professor of Finance
The Wharton School
University of Pennsylvania
Phone: (215) 746-0005
 
 
 
 
 
 
 

 

Research

Research

Research Experience

   Research Assistant for Franklin Allen and Richard Brealey (LBS), 2011-2012

   Research Assistant for Luke Taylor and Alon Brav (Duke), Spring 2012

   Research Assistant for Itay Goldstein and Luke Taylor Spring, 2011

   Research Assistant for Andrew Metrick (Yale) and Ayako Yasuda (UC Davis), 2005 - 2007

Other Working Papers

Volatility-of-Volatility Risk, with Ivan Shaliastovich

Abstract:  We show that time-varying volatility of volatility is a significant risk factor which affects both the cross-section and the time-series of index and VIX option returns, above and beyond volatility risk itself.  Volatility and volatility-of-volatility movements are identified in a model-free manner from index and VIX option prices, and correspond to the VIX and VVIX indices in the data.  The VIX and VVIX have separate dynamics and are only weakly related in the data.  Delta-hedged returns for index and VIX options are negative on average, and are more negative for strategies which are more exposed to volatility and volatility-of-volatility risks.  In the time series, volatility and volatility of volatility significantly predict delta-hedged returns with a negative sign.  The evidence in the data is consistent with a no-arbitrage model which features time-varying market volatility and volatility-of-volatility factors which are priced by investors.  In particular, volatility and volatility of volatility have negative market prices of risk, so that investors dislike increases in volatility and volatility of volatility.

Presentations:  2014 European Finance Association Meeting (Lugano), 2014 OptionMetrics Research Conference (New York), 2014 Asian Meeting of the Econometric Society (Taipei)

Risk Adjustment and the Temporal Resolution of Uncertainty: Evidence from Options Marketswith Ivan Shaliastovich

Abstract:  Risk-neutral probabilities, observable from option prices, combine objective probabilities and risk adjustments across economic states.  We consider a recursive-utility framework to separately identify objective probabilities and risk adjustments using only observed market prices.  We find that a preference for early resolution of uncertainty plays a key role in generating sizeable risk premia to explain the cross-section of risk-neutral and objective probabilities in the data.  Failure to incorporate a preference for the timing of the resolution of uncertainty (e.g., expected utility models) can significantly overstate the implied probability of, and understate risk compensations for, adverse economic states.

Presentations:  2014 Western Finance Association Meeting (Monterey), 2013 European Finance Association Meeting (Cambridge), 2013 Northern Finance Association Meeting (Quebec City), 2013 LBS Trans-Atlantic Doctoral Conference (London), 2013 North American Summer Meeting of the Econometric Society (Los Angeles), 2013 Asian Meeting of the Econometric Society (Singapore), 2013 Midwest Finance Association Meeting (Chicago)


  • Darien Huang (Draft), Gold, Platinum, and Expected Stock Returns (Job Market Paper).  Abstract
  • Darien Huang, Ivan Shaliastovich (Draft), Volatility-of-Volatility Risk.  Abstract
  • Darien Huang, Ivan Shaliastovich (Draft), Risk Adjustment and the Temporal Resolution of Uncertainty: Evidence from Options Markets.  Abstract
  • Darien Huang, Franklin Allen, Jun Qian, Mengxin Zhao (2012), The Initial Public Offering of the Industrial and Commercial Bank of China, The Frontier State of Economics: IEA XIV World Congress  Abstract

Awards And Honors

  • Fifth-Year Doctoral Fellowship, 2014
  • Dean's Fellowship for Distinguished Merit, 2010-2014
  • Wharton Undergraduate Research Award, 2008
  • Wharton Research Scholar, 2007-2008
  • Benjamin Franklin Scholar, 2004-2008

Teaching

Teaching Fellowships

   Teaching Assistant for Franklin Allen, Coursera MOOC - Intro to Corporate Finance, Fall 2013

   Teaching Assistant for Franklin Allen, FNCE 611 Corporate Finance (MBA) Fall 2011, Fall 2012, Fall 2013

   Teaching Assistant for Philip Bond, FNCE 717/206 Financial Derivatives (MBA/UG) Spring 2007