How important is the correlation between returns and volatility in a stochastic volatility model? Empirical evidence from pricing and hedging in the S&P 500 index options market

Is volatility risk priced in the securit

Is volatility risk priced in the securities market? Evidence from S&P 500 index options

✍ Yakup Eser Arisoy; Aslihan Salih; Levent Akdeniz 📂 Article 📅 2007 🏛 John Wiley and Sons 🌐 English ⚖ 214 KB 👁 1 views

## Abstract The authors examine whether volatility risk is a priced risk factor in securities returns. Zero‐beta at‐the‐money straddle returns of the S&P 500 index are used to measure volatility risk. It is demonstrated that volatility risk captures time variation in the stochastic discount factor.