The long-term and sustainable development focuses of green bond together with its increasing popularity drives the need for a better understanding of its hedging effects against market risks. Our study investigates whether and how green bond can act as a hedging instrument against implied volatility, a measure of forward-looking market uncertainty. We find evidence of significant time-varying connectedness between green bond and implied volatilities of the stock, energy, and commodity markets. Building on this characteristic, investors are required to adopt an active portfolio management strategy to ensure the hedging effectiveness of green bond against implied volatilities. Specifically, this strategy requires frequent switches between long and short positions in the green bond market. Our simple simulation study shows evidence that applying connectedness regime-dependent trading strategies can increase the hedging effectiveness of green bond against implied volatilities in terms of risk-adjusted returns.

绿色债券的长期和可持续发展重点以及其日益普及，促使人们需要更好地了解其对市场风险的对冲效果。我们的研究调查了绿色债券是否以及如何作为隐含波动率的对冲工具，隐含波动率是衡量前瞻性市场不确定性的指标。我们发现绿色债券与股票、能源和商品市场的隐含波动率之间存在显着的时变关联性的证据。基于这一特点，投资者需要采取积极的投资组合管理策略，以确保绿色债券对隐含波动率的对冲有效性。具体而言，这种策略需要在绿色债券市场多头和空头头寸之间频繁切换。