Template-type: ReDIF-Paper 1.0
Author-Name: Belén Nieto 
Author-Email: belen.nieto@ua.es
Author-Homepage: https://web.ua.es/es/researchgroupmffe/investigadores/nietodomenech.html
Author-Workplace-Name: Departamento de Economía Financiera y Contabilizad, Universidad de Alicante
Author-Name: Alfonso Novales Cinca
Author-Email: anovales@ccee.ucm.es
Author-Person: pno7 
Author-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/novales-cinca,-alfonso
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de 
	Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Name: Gonzalo Rubio
Author-Email: gonzalo.rubio@uch.ceu.es
Author-Workplace-Name: Universidad CEU Cardenal Herrera
Author-Workplace-Homepage: https://www.ucm.es/icae
Title: Variance Swaps and Intertemporal Asset Pricing
Abstract: This paper proposes an ICAPM in which the risk premium embedded in variance swaps
	is the factor mimicking portfolio for hedging exposure to changes in future investment
	conditions. Recent empirical evidence shows that the fears by investors to deviations
	from Normality in the distribution of returns are able to explain time-varying financial
	and macroeconomic risks in addition to being a determinant of the variance risk
	premium. Moreover, variance swaps hedges unfavorable changes in the stochastic
	investment opportunity set, and is not a redundant asset because significantly expands
	the efficient mean-variance frontier. Thence, we should expect the variance swap risk
	incremental pricing information associated with the variance risk premium, particularly
	at shorter horizons.
Classification-JEL: C13, C14, G10, G12
Keywords: variance risk premium, intertemporal asset pricing
Length: 33 pages 
Creation-Date: 2011 
Number: 2011-08
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1108.txt
File-URL: https://eprints.ucm.es/id/eprint/12522/1/1108.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1108