Quantile Risk Premiums

52 Pages Posted: 30 Nov 2020

See all articles by Felix Brinkmann

Felix Brinkmann

University of Goettingen (Gottingen)

Julian Dörries

University of Goettingen (Gottingen)

Olaf Korn

University of Goettingen (Gottingen)

Date Written: September 16, 2020

Abstract

This paper studies quantile-based moment premiums. The quantile-based approach delivers robust and flexible alternatives to premiums for variance, skewness and kurtosis risk and enhances our understanding of the pricing of risks in derivatives markets. To quantify these premiums, the paper introduces a new class of synthetic derivatives contracts: quantile swaps. Such contracts mimic quantile-based moment measures from robust statistics. An empirical study of index options detects two distinct premiums for dispersion and asymmetry, but no premium for steepness. This finding is in clear contrast to results obtained through traditional moment swaps and warns us to interpret moment premiums carefully.

Keywords: Quantiles, Moment Swaps, Risk Premiums

JEL Classification: G10, G12, G13

Suggested Citation

Brinkmann, Felix and Dörries, Julian and Korn, Olaf, Quantile Risk Premiums (September 16, 2020). Available at SSRN: https://ssrn.com/abstract=3706678 or http://dx.doi.org/10.2139/ssrn.3706678

Felix Brinkmann

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Julian Dörries (Contact Author)

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Olaf Korn

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany
++49 551 39 7265 (Phone)
++49 551 39 7665 (Fax)

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