# Darien Huang

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

**Links:** CV, Job Market Paper

__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 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)