Research On Volatility Risk Premium Based On SSE 50ETF Options

Volatility has always been a topic of great concern in the financial field since it was born.Fluctuations have always been in the market,especially in the financial field and financial assets such as stock prices,futures prices and options prices are always accompanied by volatility which makes the study of it necessary.Besides the conventional market risks,how volatility risk itself affects the price of financial assets in the end? What kind of reward does the market provide for volatility risk? These are worth our research.Both the classic Black-Scholes model and the CAPM model use qualitative Brownian motion(GBM)to characterize the underlying asset price.In the real market,the fluctuation of the financial asset price changes with time while the fluctuation in the geometric Brownian motion is not dependent on the time Change.Therefore,the study on volatility risk premium is an important complement to the pricing of modern financial assets.The source of risk is not only the market risk described by BS/CAPM model,but also the volatility risk as the second-order risk source which also has an important influence on the price of financial assets.Does volatility risk premium exist? How does it affect the assets? Western scholars have conducted some research on these problems.All the previous studies are based on the data of developed capitalist economies such as the United States whose information disclosure is relatively perfect,property rights are clear and market mechanism is sound and standardized.However,the capital market of our country still has some room for development.Relative to the developed economies,the market mechanism of ours is imperfect and the system is still not sound enough.Therefore,the domestic market can not be generalized to the developed economies in Europe and the United States.In particular,the options market in China did not begin trading until February 2015.That is to say,it is the initial stage of China's options market now.So it is necessary to study the risk premium of the market volatility in China.In this paper,we derive the BS BETA values of the 50 ETF call and the put options by the price of the options and the underlying asset and construct the zero-BETA straddle option portfolio to measure the volatility risk premium of our market.For the options market that already has the actual transaction data,the study on the risk premium of the market volatility in China can provide a better reference for the risk sources in the process of transaction and also some reference for investors when making decisions.At the same time,the risk of volatility is the same as other sources of risk that people will ask compensation for the corresponding risks.So how much the risk premium of such sources is also worth studying.This paper has six chapters.The first chapter is the introduction part which generally introduces the background,research purpose,research significance,research methods,contributions and innovation;the second chapter is the related literature review and all kinds of research and analysis and furthermore,the related research on volatility risk premium is sorted out and summarized;In the third part,the classic model is reviewed and summarized based on the previous studies,and the nature of the return rate of options is deduced and summarized.At the same time,the corresponding assumptions are put forward and appropriate research methods are selected.The fourth part and the fifth Part are the key contents of this article.The fourth chapter is the verification of the volatility risk premium.In this paper,by studying the return rate of the options and the underlying asset,we analyze the return rate property of the corresponding asset.We build a portfolio of options when calculating market risk values to verify whether the volatility risk premium exists in the market and use Generalized Moment estimation Method(GMM)and Generalized Empirical Likelihood estimation method(GEL)to increase the reliability of the research results.The fifth part introduces the application and influence of volatility risk premium.Empirically,the difference between the implied volatility and the historical volatility can be well explained by the volatility risk premium in our country.As for the return of the investor's demand for the volatility risk,the paper establishes a Capital Asset Pricing Model including a new pricing factor through the regression: The sixth part is the conclusion and the research prospect.After two parts of empirical research,this paper draws the following conclusions:(1)Volatility risk premium exists in China marketThe market risk of the portfolio was avoided by constructing zero-BETA options straddles.According to the yield performance of the options portfolio,the result of the research shows that it is not equal to the risk-free rate of return derived from the theory,that is to say,it proves that volatility risk premium exists in China market.Volatility risk is priced.(2)The explanatory power of volatility risk premium on differences in volatilityThis paper establishes a portfolio of options to verify the volatility risk premium.At the same time,the asset pricing is tested through Generalized Moment estimation Method(GMM).The test results confirm the existence of the volatility risk premium in China which indicates the reliability of volatility risk premium exists.This paper takes the lead in capturing the volatility risk premium to explain the differences between the theoretical volatility and the historical volatility in our country and increases the theoretical significance of the volatility risk premium when tracing their roots.(3)Complement and perfection of the capital asset pricing modelBy using the real market transaction data,the paper analyzes the BETA value of China's volatility risk premium through regression analysis and makes theoretical supplement and perfection to the financial asset pricing model which provides a strong basis for a better management of risk and investment decision-making.