Variance Risk Premiums

Peter Carr, Liuren Wu · 2009 · Review of Financial Studies

IntermediateLFTEmpiricalFree to read

Synthesises variance swap rates from option prices. Implied variance exceeds realized on average: the premium option sellers harvest.

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At a glance

Level: Intermediate: Comfortable with statistics, regressions and basic probability models
Horizon: LFT
Data needed: Daily bars Set what data you have
Themes: Options & volatility
Assets: Options
Market: US

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Cite

@article{carr2009variance,
  author = {Carr, Peter and Wu, Liuren},
  title = {{Variance Risk Premiums}},
  journal = {Review of Financial Studies},
  year = {2009},
  doi = {10.1093/rfs/hhn038}
}

Carr, P., & Wu, L. (2009). Variance Risk Premiums. Review of Financial Studies. https://doi.org/10.1093/rfs/hhn038