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: