Co-movement of volatility risk premium: evidence from single stock options market in India

ABSTRACT

This study investigates the existence of commonality of volatility risk premium in the index and individual stock options. Using data from the National Stock Exchange (NSE) India, the study finds that the commonality relationship is both economically and statistically significant. The commonality relationship is robust, even after including the market-specific and stock-specific factors.

KEYWORDS:

• Commonality
• model-free implied volatility
• realized volatility
• volatility risk premium

JEL CLASSIFICATION:

• G12
• G13
• G14

Acknowledgments

The author gratefully acknowledges the seed-money research grant by the Indian Institute of Management Ranchi.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This work was supported by the Indian Institute of Management Ranchi [Seed-money research].