Volatility Risk Premium
For wealth managers
The volatility risk premium (VRP) is the compensation earned by investors for providing protection against unexpected market volatility. Parametric’s VRP solutions are a suite of strategies that seek to capture this unique and diversifying risk premium through the systematic sale of call and put options.
The VRP can be a persistent source of return over time that may allow investors to access attractive risk-adjusted returns and increase overall portfolio diversification.
Investing in an options strategy involves risk. All investments are subject to loss. Learn more.
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Capturing the VRP systematically without leverage
Equity index options may be thought of as financial insurance contracts, and investors pay a premium for insurance-like protection against unfavorable outcomes. The size of the VRP is driven by a range of behavioral, structural, and economic factors that may lead to an imbalance between buyers and sellers of index options.
A defensively structured portfolio can capture the VRP by selling fully collateralized options without introducing leverage. Our rules-based solutions favor diversification, accessibility, and transparency.
Why choose Parametric?
$389B
Total firm
AUM
$15.5B
VRP solutions
AUM
30+
Years of
firm experience
As of 12/31/2022
Which VRP solution is right for your client?
Parametric offers a range of VRP solutions using different combinations of collateralized equity index put and call options, which can be customized to meet your clients’ portfolio objectives.
Frequently asked questions
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