Variance risk in commodity markets

Marcel Prokopczuk, Lazaros Symeonidis, Chardin Wese Simen

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We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document comovements between the realized payoffs of commodity, equity and bond variance swaps. Similar results hold for expected variance swap payoffs. Furthermore, we show that both realized and expected commodity variance swap payoffs are distinct from the realized and expected commodity futures returns, indicating that variance risk is unspanned by commodity futures.
Original languageEnglish
Pages (from-to)136–149
Number of pages14
JournalJournal of Banking and Finance
Early online date12 May 2017
Publication statusPublished - Aug 2017


  • Commodities
  • Variance risk premia
  • Variance swaps

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