The variance risk premium (VRP) is a concept in finance that refers to the difference between the actual (realized) variance of an asset's returns and the variance that is implied by the market, typically through options pricing. The variance of returns is a measure of the volatility of those returns, and the VRP can be thought of as a compensation that investors require for bearing the risk associated with changes in the volatility of an asset.

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  1. Financial economics
  2. Actuarial science
  3. Applied mathematics
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