Abstract
Abstract Realized divergence measures the distinct realized moments associated with time-varying uncertainty. It is tradeable with divergence swaps engineered from delta-hedged option portfolios. Implied divergence decomposes the price of uncertainty into distinct implied moments, in a way that is consistent with established notions of a deviation from put-call symmetry in option markets. Empirically, market implied divergence and divergence risk premia vary substantially, in the time series, cross-sectionally and as a function of the investment horizon. Such variations can help to make the potential shortcomings of a model more directly visible.
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