Volatility risk premium

In mathematical finance, the volatility risk premium [1] is a measure of the extra amount investors demand in order to hold a volatile security, above what can be computed based on expected returns. It can be defined as the compensation for inherent volatility risk divided by the volatility beta. [2]

References

  1. ^ Jared Woodard (2011). Options and the Volatility Risk Premium. Financial Times Press. ASIN B004JN0UIQ
  2. ^ Antoine Petrus Cornelius van der Ploeg (2006).Stochastic volatility and the pricing of financial derivatives. University of Amsterdam. ISBN 90-5170-577-8 page 256
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