The pricing of variance risks in agricultural futures markets: do jumps matter?
Xinyue He,
Siyu Bian,
Teresa Serra
Abstract:The existence of a negative variance risk premium on agricultural futures contracts suggests that market participants pay to hedge unexpected increases in the volatility of these contracts. In this paper, we decompose the variance risk premium in corn and soybeans markets into jump and diffusive components using options and futures data from 2009 to 2021. We find that market participants on average only pay to hedge unexpected increases in jump volatility but not those in diffusive volatility. Furthermore, gro… Show more
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