Volatility risk premium

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In mathematical finance, the volatility risk premium 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.[1]

Bibliography[edit]

  • Options and the Volatility Risk Premium by Jared Woodard 2011, Financial Times Press ASIN B004JN0UIQ

References[edit]

  1. ^ Stochastic volatility and the pricing of financial derivatives by Antoine Petrus Cornelius van der Ploeg 2006, University of Amsterdam ISBN 90-5170-577-8 page 256