3 Comments

Does the study say when VRP<1 ( IV is less than RV) and there's presence of trend premium (lower frequency rvol > higher frequency rvol)..... the future realised is less than IV, In simple terms it's better for short vol despite the presence of trend premium?

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yes, but that's based on really small sample size...it's more fodder for what could inform a much larger study tbh (although i'm not going to prioritize that and content to leave it as a prompt for others to get ideas)...instinctually at the fund i was inclined to buy stuff like this but because i was never systematic i didn't study the outcomes but also i think most of the time the market would price the IV in a way that incorporated both RV readings fairly well

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Aug 23Liked by Kris Abdelmessih

Yes, just by understanding the metrics it does make sense to intuitively just buy the vol, but the outcome is very counter intuitive....

Just like some probability problems where the answer is counter intuitive and intuition is proved wrong.

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