Staff Reports
Equity Volatility Term Premia
Previous title: “Relative Pricing and Risk Premia in Equity Volatility Markets”
Number 867
September 2018 Revised April 2022

JEL classification: C58, G12, G13

Authors: Peter Van Tassel

This paper estimates the term structure of volatility risk premia for the stock market. By modeling the logarithm of realized variance, the paper derives a closed-form relationship between the prices of variance swaps and VIX futures. Term premia estimates for realized variance and implied volatility predict variance swap and VIX futures returns. When systematic risk increases, realized variance term premia increase but implied volatility term premia decline or exhibit a muted response. VIX futures are cheaper than the option-implied model prices by .50 percent on average and they tend to cheapen even further relative to the model when the VIX increases.

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Author Disclosure Statement(s)
Peter Van Tassel
The author declares he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at
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