The curious case of the missing volatility risk premium
Volatility investors will need to work harder and smarter to capture value, says Capstone
In options trading, the prevailing wisdom that equity index options are expensive – pushed above their fair price by investors buying insurance – has long gone unchallenged. But the truth about the so-called volatility risk premium is increasingly under scrutiny.
Since the market turmoil of the Covid pandemic, the average short-term risk premium embedded in S&P 500 volatility has fallen to zero. A
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