Liberty Street Economics: The Law of One Price in Equity Volatility Markets

F E D E R A L   R E S E R V E   B A N K   o f   N E W  Y O R K LIBERTY STREET ECONOMICS   The Law of One Price in Equity Volatility Markets   Peter Van Tassel and Charles Smith   This post shows that VIX futures prices exhibit significant deviations from their option-implied upper bounds, thus violating the law of one price—a fundamental concept in economics and finance that states that assets with identical payoffs must have the same price. The deviations widen during periods of market stress and predict the returns of VIX futures.   READ MORE

 

 

 

 

 

 

 

 

Stay Connected:  @NewYorkFed | @NYFedResearch  | Facebook | LinkedIn | YouTube Download our  Economic Research Tracker to your iPhone® or iPad® Unsubscribe | Got this from a friend? Subscribe.

---

This email was sent to franchmaverickk.secretwords123@blogger.com using GovDelivery Communications Cloud on behalf of the Federal Reserve Bank of New York