Yang-Ho Park (CV)

Employment: Principal Economist, Federal Reserve Board, December 2018 -- Present.

Senior Economist, Federal Reserve Board, June 2014 -- December 2018

Economist, Federal Reserve Board, June 2011-- June 2014

Quantitative Analyst, KIS Pricing, Seoul, Korea, March 2001-- June 2004

PUBLICATIONS

• "GARCH Option Pricing with Volatility Derivatives," (with Dong Hwan Oh) Journal of Banking and Finance, vol. 146, 106718, 2023.

• "Informed Trading in Foreign Exchange Futures: Payroll News Timing," Journal of Banking and Finance, vol. 135, 106372, 2022. Download (SSRN)

• "Spread Trading as a Leading Economic Indicator," Journal of Financial Markets, vol. 59, 100681, 2022. Download (SSRN)

• "Variance Disparity and Market Frictions", Journal of Econometrics, vol. 214, pp. 326-348, 2020. Download (SSRN)

• "The Effects of Asymmetric Volatility and Jumps on the Pricing of VIX Derivatives," Journal of Econometrics, vol. 192, pp. 313-328, 2016. Download (SSRN)

• "An Empirical Analysis of Futures Margin Changes: Determinants and Policy Implications," (with Nicole Abruzzo) Journal of Financial Services Research, vol. 49(1), pp. 65-100, 2016. Download (SSRN)

• "Volatility-of-Volatility and Tail Risk Hedging Returns," Journal of Financial Markets, vol. 26, pp. 38-63, 2015. Download (SSRN)

• "Beyond Stochastic Volatility and Jumps in Returns and Volatility," (with Garland Durham) Journal of Business and Economic Statistics, vol. 31(1), pp. 107-121, 2013. Download (SSRN)

WORKING PAPERS

• "Inferring Term Rates from SOFR Futures Prices," (with Erik Heitfield), 2019. Download (SSRN)

Abstract: The Alternative Reference Rate Committee, a group of private-sector market participants convened by the Federal Reserve, has recommended that markets transition to the use of the Secured Overnight Financing Rate (SOFR) in financial contracts that currently reference US dollar LIBOR. This paper examines the feasibility of using SOFR futures prices to construct forward-looking term reference rates that are conceptually similar to the term LIBOR rates commonly used in loan contracts. We show that futures-implied term SOFR rates have closely tracked federal funds OIS rates over the eight months since SOFR futures began trading. To examine the performance of our approach over a longer time horizon, we compare term rates derived from federal funds futures with observed overnight rates and OIS rates from 2000 to the present. Consistent with prior research, we find that futures-implied term rates accurately predict realized compounded overnight rates during most periods.

• "The VIX in the Spotlight: Attention Formation and Volatility Forecasting," 2016.

Abstract: This paper reports that lagged VIX returns predict return variance across a broad range of exchange-traded funds, covering stock, bond, currency, and commodity markets. This finding is initially puzzling under the efficient market hypothesis because lagged information on option prices should have no direct predictive information for variance. To explain this finding, I identify a mediating, non-informative channel through which lagged VIX returns drive future price fluctuations. Specifically, lagged VIX returns play a crucial role in noise traders' future attention formation, which in turn has a causal effect on return variance. Thus, my result supports the literature emphasizing the role of noise traders in financial markets.

• "Improving Return Predictability Using Variance-of-Variance Premiums," 2016.

Abstract: This paper reports that the variance-of-variance premium (VVP), the difference between the risk-neutral and physical measures of variance-of-variance, has strong predictability for stock returns, especially at very short horizons. Furthermore, pooling both information on the VVP and the variance premium (VP) can deliver a large amount of statistical and economic gain compared to using either of them alone. These results corroborate the finding of Bollerslev, Tauchen, and Zhou (2009) that volatility-of-volatility risk is a critical driver of time-varying risk premiums. Finally, the results hold in the international stock markets and are robust to traditional predictors, investor sentiment proxies, and funding constraints.

• "The Roles of Short-Run and Long-Run Volatility Factors in Options Market: A Term Structure Perspective," 2012. Download (SSRN)

This paper examines the option pricing implications of short-run and long-run volatility factors, which are assumed to be driven by short-run and long-run news events, respectively. Using a comprehensive dataset of S&P 500 index options over 1993-2008, I find that the proposed two-factor volatility models have two desirable properties that help capture the term structures of option-implied volatility and skewness. First, the options data show evidence of time-variation in the long-run expectation of volatility, which may be caused by long-run news events. While this feature is inconsistent with a single-factor volatility assumption, the two-factor volatility models do a good job of matching the entire term structure of implied volatility. Second, the options data reveal that the term structure of implied skewness is nearly flat on average. This feature is hard to reconcile with single-factor volatility models and jumps in returns. In contrast, I find that the two-factor volatility models can generate flat term structures much like those seen in the data. In particular, the short-run volatility factor is dominant in generating short-term skewness, while the long-run volatility factor plays a pivotal role in generating long-term skewness.