Isolating a risk premium on the volatility of volatility

Lorenzo Ravagli shows how to exploit a risk premium embedded in the vol of vol in out-of-the-money options

Volatility arrows

The author finds that for a class of stochastic volatility models, under the limits of zero skew, short maturity and near-the money, the implied lognormal volvol enters the dynamics of an option as a breakeven term corresponding to theVolga axis of risk: a non-zero Volga term monetises a P&L that is proportional to the differential of the squared values of implied and realised volvol.


Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

If you already have an account, please sign in here.

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here