Technical Proofs: Option Bounds for Short Variance Swaps and the Variance Risk Premium - Adjusting for Skewness

11 Pages Posted: 6 Jan 2013

See all articles by Steven J. Jordan

Steven J. Jordan

Econometric Solutions

Shirley J. Huang

Singapore Management University - Lee Kong Chian School of Business

Date Written: January 3, 2013

Abstract

This paper provides the detailed technical proofs for all theorems in Jordan and Huang (2013). In that paper, semi-parametric upper bounds are derived for European call options. The first three distributions of the underlying return distribution, including skewness, are specifically accounted for. The bounds are then applied to find upper bounds for (1) Short Variance Swaps and (2) the Variance Risk Premium.

The paper "Option Bounds for Short Variance Swaps and the Variance Risk Premium - Adjusting for Skewness" to which this Technical Proof appies is available at the following URL: http://ssrn.com/abstract=2188172

Keywords: Option, Bound, Variance, Swap, Risk, Premium, Skewness, Skew, Short, Semi-Parametric, Moment, Return, Mean, Volatility, Futures, Derivative

JEL Classification: C4, C14, D4, G10, G12, G13, G14, G22, G32, L1

Suggested Citation

Jordan, Steven J. and Huang, Shirley J., Technical Proofs: Option Bounds for Short Variance Swaps and the Variance Risk Premium - Adjusting for Skewness (January 3, 2013). Available at SSRN: https://ssrn.com/abstract=2195930 or http://dx.doi.org/10.2139/ssrn.2195930

Steven J. Jordan (Contact Author)

Econometric Solutions ( email )

3520 Fossil Park Dr.
Fort Worth, TX NA 76137
United States

Shirley J. Huang

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

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