Abstract
The purpose of this study is to investigate whether volatility risk is priced in the VXX options market by constructing delta-hedged option portfolio (set the option long and hedge with stock). Data from the Chicago Board Options Exchange are used in this research, covering the period from April 6, 2010, to June 16, 2016. There are three kind of volatility measurements in this paper, including GARCH volatility, historical volatility, and volatility index calculated by the VIX methodology. Results show that the delta-hedged portfolio underperforms zero, which implies a negative risk premium. Under the specific volatility measurements, the evidence is supporting that a volatility risk premium exist in the VXX options market.