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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.
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.
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.
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
Forecasting the Distribution of Option Returns
December 12, 2018
We propose a method for constructing conditional option return distributions.
Journal Article
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.
Journal Article
The Low-Volatility Anomaly: Market Evidence on Systemic Risk vs. Mispricing
January 29, 2016
Researchers have demonstrated a long-term connection between future stock returns and various measures of prior stock price variability.
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.