← Search

Journal of Banking & Finance Vol. 81 2017

Variance risk in commodity markets

Marcel Prokopczuk1,2,3; Lazaros Symeonidis4; Chardin Wese Simen

1 Leibniz University Hannover · 2 University of Reading · 3 ICMA Centre · 4 University of East Anglia

open access

Abstract

We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document comovements between the realized payoffs of commodity, equity and bond variance swaps. Similar results hold for expected variance swap payoffs. Furthermore, we show that both realized and expected commodity variance swap payoffs are distinct from the realized and expected commodity futures returns, indicating that variance risk is unspanned by commodity futures.

DOI
10.1016/j.jbankfin.2017.05.003
Volume
81
Pages
136-149
Language
en
Sources
crossref openalex bibtex:phds-export.bib

Cite