Volatility and the cross-section of returns on FX options

被引：4

作者：

Fullwood, Jonathan ^{[1
]}

James, Jessica ^{[2
,3
]}

Marsh, Ian W. ^{[3
]}

机构：

[1] Bank England, Threadneedle St, London EC2R 8AH, England

[2] Commerzbank, 30 Gresham St, London EC2V 7PG, England

[3] City Univ London, Bayes Business Sch, 106 Bunhill Row, London EC1Y 8TZ, England

来源：

JOURNAL OF FINANCIAL ECONOMICS | 2021年 / 141卷 / 03期

关键词：

Options returns; Implied volatility; Straddles; Foreign exchange; HEDGING PRESSURE; CURRENCY RISK; EQUILIBRIUM; MARKETS; INFORMATION; DYNAMICS; PREMIA; PRICE;

D O I：

10.1016/j.jfineco.2021.04.030

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

We study the cross-section of returns on FX options sorting currencies based on implied volatilities (IVs). Long straddle positions in currencies with low (high) IVs perform well (poorly). A long low IV-short high IV strategy produces large average returns after transac-tion costs. Total volatility matters rather than any component or transformation of volatil -ity. The returns are distinct from those in the literature on foreign exchange returns or equity option returns and cannot be explained convincingly by standard risk factors. We argue cross-sectional differences in hedging demand combined with limits to arbitrage contribute to mispricing in FX options. (c) 2021 Elsevier B.V. All rights reserved.

引用

页码：1262 / 1284

页数：23

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