Business Commons^™

Asymmetry Risk And Asset Pricing, Jiahao Gu

Graduate Theses, Dissertations, and Problem Reports

The dissertation primarily focuses on asymmetry risk and its role in asset pricing. Asymmetry risk is a crucial component of systematic risk. However, it does not attract much attention, probably because of the misconception that it is similar to other asymmetry measures (e.g., skewness). Chapter 1 defines the asymmetry risk. The risk indifference curve (RIC) predicts two asymmetry premiums in the return distribution rather than one in the downside. I also derive the risk-neutral measure of asymmetry risk.

Chapter 2 empirically investigates the asymmetry beta's return predictability and tail risk hedging ability. Consistent with the risk indifference curve, the asymmetry …

Empirical Asset Pricing With Equity Tail Risk, Jingrui Li

Graduate Theses, Dissertations, and Problem Reports

This dissertation comprises three separate chapters on both risk-neutral and physical probability spaced equity tail risk for both the market index and in the cross-section of individual stocks.

The first chapter is titled “Does VIX Truly Measure Return Volatility?” This chapter studies the bias of the VIX index as a volatility measure. Particularly, VIX undervalues (overvalues) volatility when market return is expected to be negatively (positively) skewed. Alternatively, we develop a model-free generalized volatility index (GVIX). This chapter further derives the risk-neutral tail risk estimated from the VIX index.

The second chapter is titled “Decomposing the VIX: Implications for the …