This paper develops a new method to calculate hedged returns on model-free “equity VIX” option portfolios. Our returns are highly correlated with realized variance minus implied variance. Compared to CBOE’s VIX formula, our formulas are more accurate for both simulated and actual prices,...

A commonly held view in the financial and economic literature is that quot;free cash flow is badquot; in the sense that, given the opportunity, shareholders would always choose to minimize its existence. This view of the world has motivated economists such as Jensen (1988, 1993) to conclude that...