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 Markets, with 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, 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