Update 23 June 2021

Just found out that while the solution below seems great, it may not be good enough especially for adding security headers because if Cloudfront gets an error from the origin, the function will not be invoked

HTTP status codes CloudFront does not invoke edge functions for viewer response events when the origin returns HTTP status code 400 or higher.

https://docs.aws.amazon.com/AmazonCloudFront/latest/DeveloperGuide/edge-functions-restrictions.html

As of May 2021, it seems the better option would be the newly introduced Cloudfront functions which comes at a 1/6th the price of Lambda@Edge as per this blog entry https://aws.amazon.com/blogs/aws/introducing-cloudfront-functions-run-your-code-at-the-edge-with-low-latency-at-any-scale/

An example from the documentation at https://docs.aws.amazon.com/AmazonCloudFront/latest/DeveloperGuide/example-function-add-security-headers.html

function handler(event) {
    var response = event.response;
    var headers = response.headers;

    // Set HTTP security headers
    // Since JavaScript doesn't allow for hyphens in variable names, we use the dict["key"] notation 
    headers['strict-transport-security'] = { value: 'max-age=63072000; includeSubdomains; preload'}; 
    headers['content-security-policy'] = { value: "default-src 'none'; img-src 'self'; script-src 'self'; style-src 'self'; object-src 'none'"}; 
    headers['x-content-type-options'] = { value: 'nosniff'}; 
    headers['x-frame-options'] = {value: 'DENY'}; 
    headers['x-xss-protection'] = {value: '1; mode=block'}; 

    // Return the response to viewers 
    return response;
}

If you are implementing this now then you are in luck. It is much simpler from Nov 2021. Amazon has added security header natively via response header policies ie we don't have to create a lambda for just adding response headers to the application. Details https://aws.amazon.com/blogs/networking-and-content-delivery/amazon-cloudfront-introduces-response-headers-policies/.

Terraform AWS provider have started supporting aws_cloudfront_response_headers_policy from 3.64.0 https://github.com/hashicorp/terraform-provider-aws/blob/main/CHANGELOG.md#3640-november-04-2021.

Here is an example to add security headers to aws cloudfront response via terraform aws provider.

resource "aws_cloudfront_response_headers_policy" "security_headers_policy" {
  name = "my-security-headers-policy"
  security_headers_config {
    content_type_options {
      override = true
    }
    frame_options {
      frame_option = "DENY"
      override = true
    }
    referrer_policy {
      referrer_policy = "same-origin"
      override = true
    }
    xss_protection {
      mode_block = true
      protection = true
      override = true
    }
    strict_transport_security {
      access_control_max_age_sec = "31536000"
      include_subdomains = true
      preload = true
      override = true
    }
    content_security_policy {
      content_security_policy = "frame-ancestors 'none'; default-src 'none'; img-src 'self'; script-src 'self'; style-src 'self'; object-src 'none'"
      override = true
    }
  }
}

I would recommend using Lambda@Edge to append any headers that you're looking for to your origin response before it is returned to the viewer.

It can be done as simply as the below example when added as a Origin Response event.

 import json
 
 def lambda_handler(event, context):
     response = event["Records"][0]["cf"]["response"]
     headers = response["headers"]
 
     headers['strict-transport-security'] = [{key: 'Strict-Transport-Security', value: 'max-age=63072000; includeSubdomains; preload'}]; 
     headers['content-security-policy'] = [{key: 'Content-Security-Policy', value: "default-src 'none'; img-src 'self'; script-src 'self'; style-src 'self'; object-src 'none'"}]; 
     headers['x-content-type-options'] = [{key: 'X-Content-Type-Options', value: 'nosniff'}]; 
     headers['x-frame-options'] = [{key: 'X-Frame-Options', value: 'DENY'}]; 
     headers['x-xss-protection'] = [{key: 'X-XSS-Protection', value: '1; mode=block'}]; 
     headers['referrer-policy'] = [{key: 'Referrer-Policy', value: 'same-origin'}]; 
     
     response['headers'] = headers
 
     return response

For more information take a look at the Adding HTTP Security Headers Using Lambda@Edge and Amazon CloudFront blog post.