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White Paper
Covered Calls and Their Unintended Reversal Bet
June 2, 2014
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
May 11, 2018
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
Pathetic Protection: The Elusive Benefits of Protective Puts
February 24, 2017
Conventional wisdom is that put options are effective drawdown protection tools.
Working Paper
Being Right is Not Enough: Buying Options to Bet on Higher Realized Volatility
September 27, 2018
Should investors who buy options expect to profit when realized volatility increases? If so, under what conditions? To answer these questions, we analyzed the relationship between long volatility performance (buying options) and contemporaneous changes in volatility.
Working Paper
Betting Against Correlation: Testing Theories of the Low-Risk Effect
February 15, 2017
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
The Limits to Arbitrage and the Low-Volatility Anomaly
January 2, 2014
Researchers have found that a strategy of buying prior low volatility stocks and selling prior high volatility risk stocks has historically generated substantial abnormal returns in the U.S.
Interview
Meet the Expert: Roni Israelov on Volatility
October 31, 2018
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.
Journal Article
Covered Call Strategies: One Fact and Eight Myths
October 21, 2014
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.