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University of Michigan, Ross School of Business
juter at umich dot edu
Carbon VIX: Carbon Price Uncertainty and Decarbonization Investments
with Maximilian Fuchs and Johannes Stroebel
Forthcoming at the Journal of Financial Economics
We present the first uncertainty index for emission prices. Carbon price uncertainty is high, spikes around major climate policy events, and has large negative effects on polluters' decarbonization investments.
Featured in VoxEu, NBER, CEPR
Video: Virtual Derivatives Workshop
Data: carbonvix.org
The Carbon VIX
Revision requested at the Review of Financial Studies
We show that the majority of U.S. equity index derivative payoffs are biased, due to derivatives' settlement design and intermediaries' "Charm". This bias amounts to more than $3bn per year in S&P 500 options alone.
The S&P 500 Around Option Expiry
S&P 500 options earn negative returns mainly overnight. I link this timing to dealer gap risk: inventory risk from large equity price moves when overnight equity illiquidity limits delta hedging.
Cumulative Put Option Returns Around The Emergence of Overnight Equity Trading
Derivative dealers inventory hedging creates systematic and predictable equity trade flows around economic events.