TY - JOUR
T1 - The Volatility Index and Volatility Risk Premium in China
AU - Yue, Tian
AU - Ruan, Xinfeng
AU - Gehricke, Sebastian
AU - Zhang, Jin E.
PY - 2023/10
Y1 - 2023/10
N2 - We introduce the China Volatility Index (CNVIX), a model-free volatility index for the Chinese equity market based on ETF options. To construct the CNVIX, we extend the Chicago Board Options Exchange (CBOE) methodology in the emerging Chinese options market. We examine the leverage effect and volatility feedback effect between the CNVIX and the underlying asset, as well as the CNVIX's return forecastability. Our findings indicate a significant negative asymmetric leverage effect, insignificant volatility feedback effect in the CNVIX, and a positive mean volatility risk premium (VRP), which can forecast the underlying asset's returns over various horizons.
AB - We introduce the China Volatility Index (CNVIX), a model-free volatility index for the Chinese equity market based on ETF options. To construct the CNVIX, we extend the Chicago Board Options Exchange (CBOE) methodology in the emerging Chinese options market. We examine the leverage effect and volatility feedback effect between the CNVIX and the underlying asset, as well as the CNVIX's return forecastability. Our findings indicate a significant negative asymmetric leverage effect, insignificant volatility feedback effect in the CNVIX, and a positive mean volatility risk premium (VRP), which can forecast the underlying asset's returns over various horizons.
M3 - Article
SN - 1062-9769
VL - 91
SP - 40
EP - 55
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -