Carr and Wu’s (2020) framework in the oil ETF option market

IF 3.7 4区经济学 Q1 BUSINESS, FINANCE

Journal of Commodity Markets Pub Date : 2023-09-01 DOI:10.1016/j.jcomm.2023.100334

Xiaolan Jia , Xinfeng Ruan , Jin E. Zhang

{"title":"Carr and Wu’s (2020) framework in the oil ETF option market","authors":"Xiaolan Jia , Xinfeng Ruan , Jin E. Zhang","doi":"10.1016/j.jcomm.2023.100334","DOIUrl":null,"url":null,"abstract":"<div>This paper studies the information inferred from the Carr and Wu’s (2020) formula based on a new option pricing framework in the United States Oil Fund (USO) options. We first document the term structure and dynamics of the risk-neutral variance and covariance rates which lead to a “U”-shaped implied volatility smile with a positive curvature. We then investigate the return predictability of the innovations in the risk-neutral variance and covariance rates (<math><mrow><mi>D</mi><mi>R</mi><mi>N</mi><mi>V</mi></mrow></math> and <math><mrow><mi>D</mi><mi>R</mi><mi>N</mi><mi>C</mi></mrow></math>) and their term structures (<math><mrow><mi>T</mi><mi>R</mi><mi>N</mi><mi>V</mi></mrow></math> and <math><mrow><mi>T</mi><mi>R</mi><mi>N</mi><mi>C</mi></mrow></math>) and find that <math><mrow><mi>D</mi><mi>R</mi><mi>N</mi><mi>C</mi></mrow></math> is a significant and robust predictor to forecast daily, weekly and monthly USO excess returns in both statistical and economic terms based on in-sample and out-of-sample tests.</div>","PeriodicalId":45111,"journal":{"name":"Journal of Commodity Markets","volume":"31 ","pages":"Article 100334"},"PeriodicalIF":3.7000,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Commodity Markets","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2405851323000247","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

This paper studies the information inferred from the Carr and Wu’s (2020) formula based on a new option pricing framework in the United States Oil Fund (USO) options. We first document the term structure and dynamics of the risk-neutral variance and covariance rates which lead to a “U”-shaped implied volatility smile with a positive curvature. We then investigate the return predictability of the innovations in the risk-neutral variance and covariance rates ( $D R N V$ and $D R N C$ ) and their term structures ( $T R N V$ and $T R N C$ ) and find that $D R N C$ is a significant and robust predictor to forecast daily, weekly and monthly USO excess returns in both statistical and economic terms based on in-sample and out-of-sample tests.

查看原文本刊更多论文

Carr和Wu(2020)在石油ETF期权市场中的框架

本文基于一种新的期权定价框架，对美国石油基金(USO)期权中Carr和Wu(2020)公式推导出的信息进行了研究。我们首先记录了风险中性方差和协方差率的期限结构和动态，这导致了一个正曲率的“U”形隐含波动率微笑。然后，我们研究了风险中性方差和协方差率(DRNV和DRNC)及其期限结构(TRNV和TRNC)中创新的收益可预测性，并发现DRNC是基于样本内和样本外检验的统计和经济方面预测每日，每周和每月USO超额收益的重要且稳健的预测器。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Commodity Markets Multiple-

CiteScore

5.70

自引率

2.40%

发文量

期刊介绍： The purpose of the journal is also to stimulate international dialog among academics, industry participants, traders, investors, and policymakers with mutual interests in commodity markets. The mandate for the journal is to present ongoing work within commodity economics and finance. Topics can be related to financialization of commodity markets; pricing, hedging, and risk analysis of commodity derivatives; risk premia in commodity markets; real option analysis for commodity project investment and production; portfolio allocation including commodities; forecasting in commodity markets; corporate finance for commodity-exposed corporations; econometric/statistical analysis of commodity markets; organization of commodity markets; regulation of commodity markets; local and global commodity trading; and commodity supply chains. Commodity markets in this context are energy markets (including renewables), metal markets, mineral markets, agricultural markets, livestock and fish markets, markets for weather derivatives, emission markets, shipping markets, water, and related markets. This interdisciplinary and trans-disciplinary journal will cover all commodity markets and is thus relevant for a broad audience. Commodity markets are not only of academic interest but also highly relevant for many practitioners, including asset managers, industrial managers, investment bankers, risk managers, and also policymakers in governments, central banks, and supranational institutions.