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Journal Article

Pathetic Protection: The Elusive Benefits of Protective Puts

Conventional wisdom is that put options are effective drawdown protection tools.

Interview

Meet the Expert: Roni Israelov on Volatility

AQR Principal Roni Israelov answers questions about the volatility risk premium (VRP), including how it is similar to other alternative risk premia and how AQR implements it.

Working Paper

Forecasting the Distribution of Option Returns

We propose a method for constructing conditional option return distributions.

Working Paper

Betting Against Correlation: Testing Theories of the Low-Risk Effect

What drives the low-risk effect? We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).

Journal Article

Covered Calls Uncovered

White Paper

Covered Calls and Their Unintended Reversal Bet

Equity index covered calls have historically realized returns not much less than their underlying index with significantly less volatility.

White Paper

Understanding the Volatility Risk Premium

The volatility risk premium (VRP) represents the compensation that investors earn for providing protection against market losses. We explain the reasons why it may exist and explore its historical performance with a simple option-selling strategy.

Journal Article

Covered Call Strategies: One Fact and Eight Myths

Call overwriting is a method of simultaneously expressing a view on a security and its volatility, and the CBOE S&P 500 BuyWrite Index (BXM) is one of many ways to get exposure to the equity and volatility risk premia.