Variance futures tied to emerging markets have

Variance futures tied to emerging markets have outperformed developed markets contracts, pricing in higher geopolitical risks. Weekly increases have averaged 6% in variance levels, per MSCI index data. Future P/E ratio has increased from 20.36x to 21.52x. This signals a higher valuation multiple being applied to projected earnings. For comparison purposes, we choose one parametric approach for approximating the RND, as suggested by [ 9 , 15 ]. It is based on the NIG distribution, which belongs to the generalized hyperbolic class and can be characterized by its first four moments, i.e., mean, variance, skewness, and kurtosis. According to [ 16 ], these four moments can be estimated by the OTM European call and put options. One major issue with NIG density estimate is that, as shown in [ 10 ], the feasibility of NIG approach drops down as the time-to-maturity increases since more estimated skewness and kurtosis pairs fall outside the feasible domain of the NIG distribution. Variance futures on Chinese A-shares jumped 8% after surprise PBOC rate adjustments. Equity dispersion in mainland markets is being priced aggressively, influencing global volatility portfolios.