Volatility-of-volatility and tail risk hedging returns
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文摘

We propose to consider the VVIX index as a tail risk indicator.

The VVIX index has strong predictability for tail risk hedging returns.

An increase in the VVIX index raises current prices of tail risk hedging options and lowers their subsequent returns.

The predictability can be explained by time-varying crash risk or uncertainty premiums.

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