Download or read book The Volatility Risk Premium Embedded in Currency Options written by Buen Sin Low and published by . This book was released on 2020 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study employs a non-parametric approach to investigate the volatility risk premium in the over-the-counter currency option market. Using a large database of daily delta-neutral straddle quotes in four major currencies - the British pound, the euro, the Japanese yen, and the Swiss franc - we find that volatility risk is priced in all four currencies across different option maturities. We find that the volatility risk premium is negative, with the premium decreasing in maturity. Finally, we also find evidence that jump risk may be priced in the currency option market.