Graduation Year

Spring 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Eric Hughson

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© 2013 Guanli Xiao


In this thesis, I study the variance risk premium in Gold VIX market. Using synthetically created variance swaps, I quantify the variance risk premium to be average -0.068 in absolute terms and -0.358 in log return terms, meaning that purchasing volatility in Gold VIX is generally unprofitable. Although the average negative risk premium is not statistically significant, the mean log return of risk premium is robust with Newey-West test. Furthermore, I attempt to test whether risk premium vary with time or the level of the swap rate, but obtain unclear results.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.