@article{d5e03ba9b29741d5bd1ef0def3848cc7,
title = "Variance risk in commodity markets",
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.",
keywords = "Commodities, Variance risk premia, Variance swaps",
author = "Marcel Prokopczuk and Lazaros Symeonidis and {Wese Simen}, Chardin",
note = "Funding information: We thank the editor, Geert Bekaert, two anonymous referees, Martijn Boons (ECOMFIN Discussant), Chris Brooks, Jaime Casassus, Mathias Fengler (DGF discussant), Yuecheng Jia (FMA discussant), Steen Koekebakker, Lars Loechster (AFA discussant), Pascal Maenhout, Frank Moraux (AFFI discussant), Gabriel Power (EFA discussant), Leonidas Rompolis (FMA discussant), Mark Shackleton, Natalia Sizova (WFA discussant), George Skiadopoulos, Nick Taylor, Stephen Taylor (EFMA discussant), Yingying Wu and seminar participants at the Commodity Finance Workshop (2012), University of Reading (2012), Zeppelin University (2012), Cornell–FDIC Derivative Securities and Risk Management Conference (2013), Eastern Finance Association (2013), European Financial Management Association (2013), Financial Management Association (2013), German Finance Association (2013), International French Finance Association (2013), University of Liverpool (2013), Western Finance Association (2013), Leibniz University Hannover (2014), American Finance Association (2015), Thematic Semester on Commodity Derivatives Markets (2015), 4th International Symposium on Energy and Finance Issues (2016) and Energy and Commodity Finance Conference (2016) for helpful comments. This paper supersedes the paper entitled “Variance Risk Premia in Commodity Markets” by the first and last authors. Marcel Prokopczuk gratefully acknowledges financial support from the British Academy.",
year = "2017",
month = aug,
doi = "10.1016/j.jbankfin.2017.05.003",
language = "English",
volume = "81",
pages = "136--149",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
}
