What is the Volatility Risk Premium (VRP)?
Volatility Risk Premium (VRP) is compensation to an investor for bearing risk related to sudden spikes in market volatility, which tend to coincide with market declines. This risk premium is believed to arise from the behavioral bias known as risk or loss aversion, which suggests that investors are willing to sacrifice a small, but certain amount of return to remove the risk of a larger uncertain loss. We believe strategies that use options to capture the VRP can generate returns with low correlation to traditional assets and expand the benefits of diversification.
Our VRP focused suite of products are designed to balance upside and downside exposure. With deep options experience over multiple market cycles, our derivative strategies offer passive exposure to the underlying index through an actively managed option selection process.