Volatility Analytics

VOLATILITY RISK PREMIUM

Compare 21-day realized volatility against 30-day implied volatility to identify systematically overpriced or underpriced options. VRP Z-score signals mean-reversion opportunities: positive extremes favor selling vol; negative extremes favor buying vol.

Nightly Updated — BTZ 2009 methodology

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Market Avg VRP

IV_30d − RV_21d average (pp)

Sell-Vol Signals

—

Z-score > 1.5 · IV overpriced

Buy-Vol Signals

—

Z-score < −1.5 · IV underpriced

RV vs IV Scatter

Realized Vol vs Implied Vol

Diagonal = fair-value line (IV = RV). Points above line = IV overpriced.

Sell Vol

Buy Vol

Neutral

Fair Value (IV=RV)

VRP Breakdown

Per-Ticker Volatility Risk Premium

Sorted by VRP Z-Score descending · Sell-Vol opportunities first

Ticker	RV 21d	IV 30d	VRP Spread	VRP Z-Score	Percentile	Signal	Strategy Suggestion	Risk
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Methodology

RV Estimator

Yang-Zhang (2000) close-to-close 21-day annualized realized volatility. Accounts for overnight jumps and intraday dynamics.

IV Estimator

Bakshi-Kapadia-Madan (2003) — model-free 30-calendar-day ATM implied volatility from the options chain spanning nearest two expiries.

VRP Definition & Signals

VRP = IV_30d − RV_21d (annualized, percentage points). Z-score vs 252-day rolling window. Sell-Vol: z > 1.5; Buy-Vol: z < −1.5.

Academic Basis

Bollerslev, Tauchen & Zhou (2009) — "Expected Stock Returns and Variance Risk Premia." VRP predicts equity returns at 1-month horizon (R² ≈ 3-5%).

rv-iv-spread-btz-2009-2026-06-06-v1