• Skip to main content
  • Skip to footer

OptionMetrics

search
  • About Us
    • Who We Serve
    • Why OptionMetrics
    • Leadership
  • Data Products
    • Equities
      • United States
      • United States Intraday
      • Europe
      • Asia
      • Canada
      • ETFs
    • Futures
    • Signed Volume
    • Implied Beta
    • Dividend
      • Implied Dividend
      • Dividend Forecasting
  • Research
  • Blog
  • News & Events
  • Careers
  • Contact

P. Vokata: Juicing the Coupon Yield: How Banks Extract Rents from Behavioral Biases

July 29, 2025

The fees on yield enhancement products increase strongly with coupons, despite minimal pass-through of coupons to returns. As a result, higher coupons paradoxically lead to lower net expected returns. Demand estimates exploiting pricing shocks show investors pay over 35 basis points for one percentage point of coupon. Banks engineer coupons using exotic, hard-to-value options that artificially increase coupons, but much less so returns. These patterns are inconsistent with standard reaching-for-yield models and instead point to investor inattention to shrouded attributes. I show that the resulting rents extracted by banks are several times larger than those documented in other financial markets.

Download

Share this post:
  • Facebook
  • Pinterest
  • Twitter
  • Linkedin
OptionMetrics Logo
  • About Us
  • Who We Serve
  • Why OptionMetrics
  • Leadership
  • Data Products
  • Equities
  • Futures
  • Signed Volume
  • Implied Beta
  • Dividend
  • Research
  • Blog
  • News & Events
  • Careers
  • Contact Us
  • Support Request
Stay Connected

dashicons-linkedin dashicons-twitter dashicons-facebook-alt

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply

© 2025 OptionMetrics, LLC. All Rights Reserved. | Privacy Policy | Terms of Use | Accessibility | Site Map