D is correct. Volatility risk relates to the risk of poor performance during turbulent market conditions when volatility spikes. Out-of-the-money (OTM) put options gain significantly in value when markets fall and volatility increases (due to positive vega and convexity). Therefore, purchasing OTM puts is a highly effective way to hedge against volatility risk.

A is incorrect. An asset that has high payoffs during adverse market conditions essentially acts as insurance. Because investors value this hedging property, they bid up the asset's price, resulting in lower (or even negative) expected returns/risk premiums, not high risk premiums.

B is incorrect. While investors in the same assets face the same underlying risk factors, they do not necessarily have the same optimal exposure. Optimal exposure depends heavily on individual investor preferences, liabilities, risk aversion levels, and broader portfolio context.

C is incorrect. Not all investments are affected negatively by declining economic growth. For example, high-quality government bonds often see price appreciation during economic downturns due to central bank interest rate cuts or a "flight to safety."