Volatility Risk Premium
For institutional investors
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 effectively and consistently
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.
Using different combinations of collateralized equity index put and call option positions, your institution can access VRP strategies across a range of equity market betas.
Which VRP solution is right for you?
Why choose Parametric?
More to explore
Municipal Bond Premiums: Separating Fact from Fiction
by Jonathan Rocafort, Managing Director, Head of Fixed Income Solutions; Evan Rourke, Director, Portfolio Management
June 24, 2025
This paper helps dispel common misconceptions about premium municipal bonds that can lead to poor decision-making. Once investors learn the difference between fact and fiction regarding municipal bond premium prices, they can make decisions that lead to better investment outcomes.
