Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Relying on options written on the USO, an exchange traded fund tracking the daily price changes of the WTI light sweet crude oil, we extract variance and skew risk premiums in a model-free way. We further decompose these risk premiums into downside and upside conditional components and show that they can be partially explained by USO excess returns and, more importantly, these decomposed risk premiums enable a much better prediction of USO excess returns than the standard, or undecomposed, variance and skew risk premiums. A comparison with existing results for the equity index option market further confirms the usefulness of the decomposition for the crude oil market.