Linking the performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
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The advent of quantitative investing has made it increasingly important to understand the performance drivers of systematic strategies that use derivatives, such as those based on the sale of options. In this paper Olivier Daviaud and Abhishek Mukhopadhyay introduce a new formulaic representation to analyse the performance of delta-hedged vanilla options, and as a by-product provide an explicit link between that performance and the so-called volatility premium
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