New eBook Short: Options and the Volatility Risk Premium

I’m excited to announce the publication of Options and the Volatility Risk Premium, a short eBook (about 4500 words) published by FT Press. I have written about the volatility risk premium (VRP) before on this blog, and published a feature article in Expiring Monthly last year on the presence of the VRP in commodity options.

  • The first part of the text explains the concept of the volatility risk premium and gives a rationale for why it exists.
  • The second part reviews the evidence – including the most current academic research – for the presence of a VRP in every major asset class.
  • Part three presents some techniques for estimating, predicting, and trading the VRP – including discussion of volatility selling strategies like short variance swaps.

An excerpt is available at the blog of the New York Society of Security Analysts. The text is available as a PDF as well as in other proprietary formats:

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1 Comments For This Post

  1. D. Hom Says:

    From the excerpts I can read at Safari Books, this looks like an excellent piece of analysis. I’ll be purchasing up a copy shortly.

2 Trackbacks For This Post

  1. Something Strange is Happening to Treasury Bond Options | Condor Options Says:

    [...] actual statistical volatility that occurs in the underlying asset. This phenomenon is known as the volatility risk premium (VRP). Think of an investor who wants to hedge her stock portfolio and buys some puts on an equity [...]

  2. A Long Term Look at the S&P 500 Volatility Risk Premium  | Condor Options Says:

    [...] most traders are interested is the difference between those two estimates, otherwise known as the volatility risk premium. It is well known that, most of the time, the difference between the realized volatility of SPX [...]

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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