The Alternative View – VRP and Credit

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In Short

Positions in investment grade corporate bonds are held by many market participants.

The Volatility Risk Premium (VRP) as a practical alternative to credit

Traditional balanced portfolios typically hold a substantial exposure to investment grade corporate bonds alongside equities and government bonds while many pension managers hold the asset class – inherently risky assets – to match future fund liabilities.

Separately, in recent years there has been increased awareness and use of diversified alternative risk premia, of which one of the most persistent and historically resilient is the volatility risk premium.

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