VDAX -NEW. Deutsche Börse AG Frankfurt am Main, April 2005

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "VDAX -NEW. Deutsche Börse AG Frankfurt am Main, April 2005"

Transcription

1 VDAX -NEW Deutsche Börse AG Frankfurt am Main, April 2005

2 With VDAX -NEW, Deutsche Börse quantifies future market expectations of the German stock market Overview VDAX -NEW Quantifies the expected risk in the German stock market Launch: 20 April a) Index is strongly rule-based, transparent and easy to replicate b) Volatility is strongly un-correlated to equities and therefore offers perfect diversification for portfolios a) VDAX -NEW represents a separate asset class and is a perfect underlying for structured products 1

3 1 VDAX -NEW as a tradable volatility instrument How about volatility? Volatility tends to grow during times of uncertainty (fear gauge) Volatility tends to revert to its historical mean VDAX -NEW is the market barometer of the DAX 30 companies Volatility is un-correlated with its underlying Implied volatility tends to be larger than realized/historical volatility Volatility can be traded as implied, local and realized volatility The index expresses the market expectation of the amplitude of fluctuation in the DAX VDAX -NEW as a transparent, liquid and tradable volatility instrument 2

4 1 The index specification of VDAX -NEW is simple, transparent and based on high liquidity Index Features VDAX -NEW Approach Underlying options Implied variances of all relevant options per duration performes analogue to implied volatility Implied variances are easier to hegde than implied volatility Relevant option subset is based on 8 option series with max. expiration of 2 years Calculation Rolling index has a fixed expiration of 30 days with linear interpolation Derived directly from option prices 3

5 1 The index design is rule-based, transparent and simple to rebuild Index Methodology Evaluation of Sub-index per option expiry based on the square-root of implied variance 100 times the square root of σ 2 Var The first 8 expirations are covered by sub-indices Stable and nice formula for evaluation using options prices directly not implied volatilities: summation of OTM prices More representative (strip of options) Index is closely related to implied ATM volatility Information on full skew is contained in strip of options All sub-indices are calculated real time Update frequency of 1 minute Construction of rolling index at 30 days to expiration through linear interpolation of the two nearest sub-indices 4

6 1 There are important differences in the methodology of VDAX and VDAX -NEW Differences between VDAX -NEW and VDAX VDAX Measures implied volatility using the ATM DAX options Calculation needs the Black-Scholes Option Pricing Model and is computationally intensive Main index has a rolling fixed maturity of 45 days VDAX - NEW Utilizes implied volatility derived from ATM and OTM-options per maturiry series Mathematical basis is not volatility but rather variance or volatility squared Calculation does not need option pricing model but only involves summations over option prices and is computationally less intensive Index measures the square root of the implied variance Main index has a rolling fixed maturity of 30 days 5

7 1 Relevant improvements of VDAX -NEW Relevant improvements in the methodology of VDAX -NEW Observed ATM and OTM-options covers and captures more of the volatility skew than the old methodology. Index is therefore less sensitive to individual options. Avoidance of an option pricing model makes the new index computationally less intensive VDAX -NEW is easier to hedge the coverage of a broader volatility skew makes it easier and cheaper to fine tune and dynamically hedge your option portfolio Whereas VDAX contains information about ATM option prices, the square root of implied variance contains information about the entire volatility surface. The methodology of VDAX -NEW measures expected volatility as financial theorists, risk managers and volatility traders so it is in dependence on financial and risk industry practices. 6

8 2 VDAX -NEW is highly correlated to VDAX and an ideal successor index Performance VDAX -NEW vs. VDAX 1) Price Correlation coefficient between VDAX -NEW AND VDAX is 0, Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 Date May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 VDAX -NEW is the perfect successor-index for VDAX VDAX -NEW VDAX 1) Indexed at 100 points on 4 January

9 2 VDAX -NEW is highly uncorrelated to DAX and MDAX and therefore interesting for diversification Performance VDAX -NEW vs. DAX and MDAX 1) 300 Price VDAX -NEW MDAX VDAX -NEW is highly uncorrelated to DAX and MDAX VDAX -NEW set-up volatility as a new asset class 50 Jan Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Date Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Establish risk-insurance product for DAX and MDAX related portfolios Price VDAX -NEW VDAX -NEW VDAX -NEW 1 DAX MDAX 50 DAX DAX - 0, Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 MDAX - 0,8896 0, Date 1) Indexed at 100 points on 2 January

10 2 A portfolio diversification with VDAX -NEW generates better performance with lower risk exposure Performance DAX/VDAX -NEW Portfolio vs. DAX 1) 600 Price Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Date Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 DAX (80%) and VDAX - NEW (20%) portfolio generates on average nearly 3 percentage points better performance Diversification with VDAX -NEW generates additional performance with lower risk exposure DAX TR Portfolio: 80% DAX 20 % VDAX -NEW 1) Indexed at 100 points on 2 January

11 3 VDAX -NEW as information tool and underlying for trading strategies Application of VDAX -NEW I. VDAX -NEW as Information tool For buy side, research and issuers of structured products II. VDAX -NEW as underlying for trading strategies Directional Trading: Betting on future levels of volatility/risk Spread Trading: Trade the spread between realized and implied volatilities Hedging: Cover short volatility positions 10

12 3 VDAX -NEW as a perfect underlying for structured products with a tactic investment perspective Possible use cases Investment function For heavy trader who want to speculate on pure volatility Diversification instrument For investors who want to diversify German equity portfolios Information and benchmarking Benchmark for German equity volatility VDAX -NEW allows the development of complex structured products looking for an exposure to volatility! 11

13 Fast Facts VDAX -NEW Index Performance 1) compared to DAX Index Features Price VDAX -NEW: start as of 20 April 2005 Expresses market expectation of the amplitude of fluctuation in DAX 1 rolling main index and 8 sub-indices Index is able to react only to changes in volatility 50 0 Index Methodology Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Date VDAX -NEW DAX 11) Indexed at 100 points on 2 January 2003 Index VDAX -NEW ISIN DE000A0DMX99 REUTERS.V1Xi Bloomberg V1X Jan-04 Apr-04 Jul-04 Calculation of implied variances of relevant DAX options Index is based on 8 sub-indices which include DAX options from 2-24 months expiration Rolling index is calculated on linear interpolation of two sub-indices with residual term of 30 days 12

14 Contact Heiko Geiger (Marketing & Sales) Issuer Data & Analytics Konrad Sippel (Index Development) Issuer Data & Analytics

DAXplus Covered Call Index. Deutsche Börse AG Frankfurt am Main January 2006

DAXplus Covered Call Index. Deutsche Börse AG Frankfurt am Main January 2006 DAXplus Covered Call Index Deutsche Börse AG Frankfurt am Main January 2006 Index-option strategies generate excess return with lower risk as well as performance benchmarks Possible use cases for index-option

More information

Variance swaps and CBOE S&P 500 variance futures

Variance swaps and CBOE S&P 500 variance futures Variance swaps and CBOE S&P 500 variance futures by Lewis Biscamp and Tim Weithers, Chicago Trading Company, LLC Over the past several years, equity-index volatility products have emerged as an asset class

More information

EXECUTE SUCCESS. {at work}

EXECUTE SUCCESS. {at work} EXECUTE SUCCESS TM {at work} VIX T H E C B O E V O L A T I L I T Y I N D E X 1 W H AT I S V I X & W H AT D O E S I T M E A S U R E? T H E I N D U S T R Y S TA N D A R D I N V O L AT I L I T Y MEASUREMENT

More information

Sensex Realized Volatility Index

Sensex Realized Volatility Index Sensex Realized Volatility Index Introduction: Volatility modelling has traditionally relied on complex econometric procedures in order to accommodate the inherent latent character of volatility. Realized

More information

NOVEMBER 2010 VOLATILITY AS AN ASSET CLASS

NOVEMBER 2010 VOLATILITY AS AN ASSET CLASS NOVEMBER 2010 VOLATILITY AS AN ASSET CLASS 2/11 INTRODUCTION Volatility has become a key word of the recent financial crisis with realised volatilities of asset prices soaring and volatilities implied

More information

Xetra. The market. Xetra: Europe s largest trading platform for ETFs. ETF. One transaction is all you need.

Xetra. The market. Xetra: Europe s largest trading platform for ETFs. ETF. One transaction is all you need. Xetra. The market. Xetra: Europe s largest trading platform for ETFs ETF. One transaction is all you need. Deutsche Börse Group is the leading global service provider to the securities industry. Its cutting-edge

More information

Volatility derivatives at Eurex Exchange. November 2014

Volatility derivatives at Eurex Exchange. November 2014 Volatility derivatives at Eurex Exchange November 2014 Agenda What volatility derivatives can do for you Eurex Exchange s volatility derivatives VSTOXX Advanced Services Liquidity and volume Trading strategies

More information

Equity derivative strategy 2012 Q1 update and Trading Volatility

Equity derivative strategy 2012 Q1 update and Trading Volatility Equity derivative strategy 212 Q1 update and Trading Volatility Colin Bennett (+34) 91 28 9356 cdbennett@gruposantander.com 1 Contents VOLATILITY TRADING FOR DIRECTIONAL INVESTORS Call overwriting Protection

More information

Designing The Ideal Investment Policy Presented To The Actuaries Club of the Southwest & the Southeastern Actuarial Conference

Designing The Ideal Investment Policy Presented To The Actuaries Club of the Southwest & the Southeastern Actuarial Conference Designing The Ideal Investment Policy Presented To The Actuaries Club of the Southwest & the Southeastern Actuarial Conference Presented by: Greg Curran, CFA & Michael Kelch, CFA AAM - Insurance Investment

More information

EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX

EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX DECEMBER 2008 Independent advice for the institutional investor EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX EXECUTIVE SUMMARY The CBOE S&P 500 PutWrite Index (ticker symbol

More information

The Coming Volatility

The Coming Volatility The Coming Volatility Lowell Bolken, CFA Vice President and Portfolio Manager Real estate Securities June 18, 2015 www.advantuscapital.com S&P 500 Percent Daily Change in Price September 2008 to April

More information

Stock Market Volatility during the 2008 Financial Crisis

Stock Market Volatility during the 2008 Financial Crisis Stock Market Volatility during the 2008 Financial Crisis Kiran Manda * The Leonard N. Stern School of Business Glucksman Institute for Research in Securities Markets Faculty Advisor: Menachem Brenner April

More information

Swiss Alpha Strategy Certificates

Swiss Alpha Strategy Certificates Swiss Alpha Strategy Certificates Harvesting option premium Nomura NOVEMBER 2006 Nomura and its platform Altrus Nomura The Nomura Group is a global financial services firm dedicated to providing a broad

More information

Option Pricing Beyond Black-Scholes Dan O Rourke

Option Pricing Beyond Black-Scholes Dan O Rourke Option Pricing Beyond Black-Scholes Dan O Rourke January 2005 1 Black-Scholes Formula (Historical Context) Produced a usable model where all inputs were easily observed Coincided with the introduction

More information

9 Hedging the Risk of an Energy Futures Portfolio UNCORRECTED PROOFS. Carol Alexander 9.1 MAPPING PORTFOLIOS TO CONSTANT MATURITY FUTURES 12 T 1)

9 Hedging the Risk of an Energy Futures Portfolio UNCORRECTED PROOFS. Carol Alexander 9.1 MAPPING PORTFOLIOS TO CONSTANT MATURITY FUTURES 12 T 1) Helyette Geman c0.tex V - 0//0 :00 P.M. Page Hedging the Risk of an Energy Futures Portfolio Carol Alexander This chapter considers a hedging problem for a trader in futures on crude oil, heating oil and

More information

Case study: Making the move into investment grade corporates

Case study: Making the move into investment grade corporates National Asset-Liability Management Europe Case study: Making the move into investment grade corporates Tomas Garbaravičius 3 March 2016 London Outline The reasoning behind the decision to corporate bonds

More information

Currency Risk, In Context. Seafarer Capital Partners, LLC. March 2015

Currency Risk, In Context. Seafarer Capital Partners, LLC. March 2015 Currency Risk, In Context Seafarer Capital Partners, LLC March 2015 Disclosures ALPS Distributors, Inc. is the distributor for the Seafarer Overseas Growth and Income Fund. This material must be accompanied

More information

MAKE VOLATILITY YOUR ASSET. LJM PRESERVATION & GROWTH FUND

MAKE VOLATILITY YOUR ASSET. LJM PRESERVATION & GROWTH FUND MAKE VOLATILITY YOUR ASSET. LJM PRESERVATION & GROWTH FUND MARKETS CAN BE ROCKY. HARNESS VOLATILITY WITH LIQUID ALTERNATIVES. Liquid alternatives are mutual fund investments that derive value from sources

More information

Pricing and Strategy for Muni BMA Swaps

Pricing and Strategy for Muni BMA Swaps J.P. Morgan Management Municipal Strategy Note BMA Basis Swaps: Can be used to trade the relative value of Libor against short maturity tax exempt bonds. Imply future tax rates and can be used to take

More information

A comparison between different volatility models. Daniel Amsköld

A comparison between different volatility models. Daniel Amsköld A comparison between different volatility models Daniel Amsköld 211 6 14 I II Abstract The main purpose of this master thesis is to evaluate and compare different volatility models. The evaluation is based

More information

Volatility products at Eurex Exchange. February 7, 2012

Volatility products at Eurex Exchange. February 7, 2012 Volatility products at Eurex Exchange Volatility Products at Eurex Exchange Agenda Introduction Properties of volatility Eurex products, liquidity and volume VSTOXX strategies at a glance Further information

More information

Xetra. The market. Xetra: Europe s largest trading. ETF. One transaction is all you need.

Xetra. The market. Xetra: Europe s largest trading. ETF. One transaction is all you need. Xetra. The market. Xetra: Europe s largest trading platform for ETFs ETF. One transaction is all you need. 2 3 Deutsche Börse Group is the leading global service provider to the securities industry. Its

More information

Volatility Dispersion Presentation for the CBOE Risk Management Conference

Volatility Dispersion Presentation for the CBOE Risk Management Conference Volatility Dispersion Presentation for the CBOE Risk Management Conference Izzy Nelken 3943 Bordeaux Drive Northbrook, IL 60062 (847) 562-0600 www.supercc.com www.optionsprofessor.com Izzy@supercc.com

More information

$24 47.6% BILLION. The Bats-T3 SPY Volatility Index Introducing the SPYIX ( Spikes ) INTRODUCTION. Page 1

$24 47.6% BILLION. The Bats-T3 SPY Volatility Index Introducing the SPYIX ( Spikes ) INTRODUCTION. Page 1 The Bats-T3 SPY Volatility Index Introducing the SPYIX ( Spikes ) Page 1 INTRODUCTION The Bats-T3 SPY Volatility Index (SPYIX the Spikes ) is a measure of expected 30-day volatility in the SPDR S&P 500

More information

SSgA CAPITAL INSIGHTS

SSgA CAPITAL INSIGHTS SSgA CAPITAL INSIGHTS viewpoints Part of State Street s Vision thought leadership series A Stratified Sampling Approach to Generating Fixed Income Beta PHOTO by Mathias Marta Senior Investment Manager,

More information

Deutsche Börse Blue Chip Indices

Deutsche Börse Blue Chip Indices Deutsche Börse Blue Chip Indices The index family for the German equity market 2 DAX, MDAX, TecDAX, SDAX Deutsche Börse Blue Chip Indices Deutsche Börse Index Products Benchmarks and Underlyings for International

More information

Russell Rhoads, CFA Instructor The Options Institute. 2010 Chicago Board Options Exchange, Incorporated. All rights reserved.

Russell Rhoads, CFA Instructor The Options Institute. 2010 Chicago Board Options Exchange, Incorporated. All rights reserved. Trading VIX Futures and Options Russell Rhoads, CFA Instructor The Options Institute 2010 Chicago Board Options Exchange, Incorporated. All rights reserved. CBOE Disclaimer Options and futures involve

More information

Identifying the Differences Between VIX Spot and Futures

Identifying the Differences Between VIX Spot and Futures PRACTICE ESSENTIALS STRATEGY 201 U.S. Identifying the Differences Between VIX Spot and Futures CONTRIBUTOR Berlinda Liu berlinda.liu@spdji.com The S&P Dow Jones Indices Practice Essentials series is a

More information

SLVO Silver Shares Covered Call ETN

SLVO Silver Shares Covered Call ETN Filed pursuant to Rule 433 Registration Statement No. 333-180300-03 April 15, 2014 SLVO Silver Shares Covered Call ETN Credit Suisse AG, Investor Solutions April 2014 Executive Summary Credit Suisse Silver

More information

Trading Equity Options Week 3

Trading Equity Options Week 3 Copyright 2016 Craig E. Forman All Rights Reserved www.tastytrader.net Trading Equity Options Week 3 A Real Financial Network for the Individual Investor Disclosure All investments involve risk and are

More information

Index Volatility Futures in Asset Allocation: A Hedging Framework

Index Volatility Futures in Asset Allocation: A Hedging Framework Investment Research Index Volatility Futures in Asset Allocation: A Hedging Framework Jai Jacob, Portfolio Manager/Analyst, Lazard Asset Management Emma Rasiel, PhD, Assistant Professor of the Practice

More information

DAXplus Family Construction and Analysis of a Family Firm Index

DAXplus Family Construction and Analysis of a Family Firm Index Technische Universität München DAXplus Family Construction and Analysis of a Family Firm Index 11 November 2009 Univ.-Prof. Dr. Christoph Kaserer Department of Financial Management and Capital Markets

More information

IPI s 2012 Fall Forum - San Francisco Hedging Portfolio Risk

IPI s 2012 Fall Forum - San Francisco Hedging Portfolio Risk IPI s 2012 Fall Forum - San Francisco Hedging Portfolio Risk Vince Gubitosi, President and CIO Mitch Livstone, Senior Portfolio Manager Geode Capital Management Outline Defining Tail Risk Tail Risk Examples

More information

Volatility: A Brief Overview

Volatility: A Brief Overview The Benefits of Systematically Selling Volatility July 2014 By Jeremy Berman Justin Frankel Co-Portfolio Managers of the RiverPark Structural Alpha Fund Abstract: A strategy of systematically selling volatility

More information

Evolution of GTAA Investment Styles. In This Issue: June 2012

Evolution of GTAA Investment Styles. In This Issue: June 2012 June 2012 ALPHA GROUP TOPIC The Alpha Group researches investment managers. In This Issue: n Evolution of GTAA Investment Styles n Risk-Parity vs. GTAA Managers n Implementation n Investing in a GTAA Strategy

More information

BMO Corporate Bond ETFs

BMO Corporate Bond ETFs For professional investors only Exchange Traded Funds PAGE 1 BMO Corporate Bond ETFs Diversified, global bond exposure ember 20 Contact us Client Services +44 (0) 20 70 4444 client.service@bmogam.com bmogam.com/etfs

More information

How to Use the IV Index

How to Use the IV Index How to Use the IV Index Fidelity Brokerage Services, Member NYSE, SIPC 561107.1.0 2010 FMR LLC. All rights reserved. Table of Contents 1. Introduction... 2 2. Getting Started... 2 3. Reading the Data...

More information

IL GOES OCAL A TWO-FACTOR LOCAL VOLATILITY MODEL FOR OIL AND OTHER COMMODITIES 15 // MAY // 2014

IL GOES OCAL A TWO-FACTOR LOCAL VOLATILITY MODEL FOR OIL AND OTHER COMMODITIES 15 // MAY // 2014 IL GOES OCAL A TWO-FACTOR LOCAL VOLATILITY MODEL FOR OIL AND OTHER COMMODITIES 15 MAY 2014 2 Marie-Lan Nguyen / Wikimedia Commons Introduction 3 Most commodities trade as futures/forwards Cash+carry arbitrage

More information

10 knacks of using Nikkei Volatility Index Futures

10 knacks of using Nikkei Volatility Index Futures 10 knacks of using Nikkei Volatility Index Futures 10 KNACKS OF USING NIKKEI VOLATILITY INDEX FUTURES 1. Nikkei VI is an index indicating how the market predicts the market volatility will be in one month

More information

Sector Rotation Strategies

Sector Rotation Strategies EQUITY INDEXES Sector Rotation Strategies APRIL 16, 2014 Financial Research & Product Development CME Group E-mini S&P Select Sector Stock Index futures (Select Sector futures) provide investors with a

More information

Charles University, Faculty of Mathematics and Physics, Prague, Czech Republic.

Charles University, Faculty of Mathematics and Physics, Prague, Czech Republic. WDS'09 Proceedings of Contributed Papers, Part I, 148 153, 2009. ISBN 978-80-7378-101-9 MATFYZPRESS Volatility Modelling L. Jarešová Charles University, Faculty of Mathematics and Physics, Prague, Czech

More information

About Volatility Index. About India VIX

About Volatility Index. About India VIX About Volatility Index Volatility Index is a measure of market s expectation of volatility over the near term. Volatility is often described as the rate and magnitude of changes in prices and in finance

More information

MANAGING POSITIONS PRE- AND POST-TRADE. For educational purposes only. For professional and institutional clients only

MANAGING POSITIONS PRE- AND POST-TRADE. For educational purposes only. For professional and institutional clients only MANAGING POSITIONS PRE- AND POST-TRADE For educational purposes only. For professional and institutional clients only Introduction GABRIEL MANCEAU Barclays, Volatility Trader ANTOINE DELGA Bloomberg, Equity

More information

Hedging Strategies Using

Hedging Strategies Using Chapter 4 Hedging Strategies Using Futures and Options 4.1 Basic Strategies Using Futures While the use of short and long hedges can reduce (or eliminate in some cases - as below) both downside and upside

More information

INVESTMENT STRATEGIES: NO. 28

INVESTMENT STRATEGIES: NO. 28 European Equity Derivatives Research J.P. Morgan Securities Ltd. London, 17 November, 6 Variance Swaps Variance swaps offer straightforward and direct exposure to the volatility of an underlying Returns

More information

Pair Trading with Options

Pair Trading with Options Pair Trading with Options Jeff Donaldson, Ph.D., CFA University of Tampa Donald Flagg, Ph.D. University of Tampa Ashley Northrup University of Tampa Student Type of Research: Pedagogy Disciplines of Interest:

More information

the basics of Implied Volatility

the basics of Implied Volatility the basics of Implied Volatility About VSTOXX and VIX Short- and Mid-Term Futures Indices Volatility is a complex investment tool and is aimed at sophisticated investors who understand the way volatility

More information

Robeco High Yield Bonds

Robeco High Yield Bonds Important Information 1. Robeco High Yield Bonds (the Fund aims to provide long term capital growth. The Fund invests at least two thirds of its total assets in bonds, asset backed securities and similar

More information

Risk and Return in the Canadian Bond Market

Risk and Return in the Canadian Bond Market Risk and Return in the Canadian Bond Market Beyond yield and duration. Ronald N. Kahn and Deepak Gulrajani (Reprinted with permission from The Journal of Portfolio Management ) RONALD N. KAHN is Director

More information

Use of fixed income products within a company's portfolio

Use of fixed income products within a company's portfolio Theoretical and Applied Economics Volume XIX (2012), No. 10(575), pp. 5-14 Use of fixed income products within a company's portfolio Vasile DEDU The Bucharest University of Economic Studies vdedu03@yahoo.com

More information

Hedging Illiquid FX Options: An Empirical Analysis of Alternative Hedging Strategies

Hedging Illiquid FX Options: An Empirical Analysis of Alternative Hedging Strategies Hedging Illiquid FX Options: An Empirical Analysis of Alternative Hedging Strategies Drazen Pesjak Supervised by A.A. Tsvetkov 1, D. Posthuma 2 and S.A. Borovkova 3 MSc. Thesis Finance HONOURS TRACK Quantitative

More information

Risk Management for Fixed Income Portfolios

Risk Management for Fixed Income Portfolios Risk Management for Fixed Income Portfolios Strategic Risk Management for Credit Suisse Private Banking & Wealth Management Products (SRM PB & WM) August 2014 1 SRM PB & WM Products Risk Management CRO

More information

CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX

CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX calculation. THE NEW CBOE VOLATILITY INDEX - VIX In

More information

Good for business: get your forex transactions on track

Good for business: get your forex transactions on track Companies Foreign currencies Good for business: get your forex transactions on track Do you want to hedge foreign currency risks or invest in forex? A bank that takes your needs into account and provides

More information

The International Derivatives Exchange. February 2009

The International Derivatives Exchange. February 2009 The International Derivatives Exchange February 2009 Eurex The International Derivatives Exchange Risk Statement Risk Statement This presentation is for information purposes only and shall not constitute

More information

DAXglobal BRIC Index December 2009

DAXglobal BRIC Index December 2009 DAXglobal BRIC Index December 2009 Agenda Deutsche Börse Issuer Data & Analytics, 14 May 2010 Page A. Investment rationale for BRIC countries 3 B. Index methodology 7 C. Index keyfigures 13 D. Master Data

More information

Investing in Bonds challenges and opportunities in 2015

Investing in Bonds challenges and opportunities in 2015 For Financial Brokers and Advisors Only Investing in Bonds challenges and opportunities in 2015 March 2015 Andy Ivory-Corr, QFA, Grad Dip, CFP Head of Investments New Ireland Assurance What exactly is

More information

Identifying the Differences Between VIX Spot and Futures

Identifying the Differences Between VIX Spot and Futures PRACTICE ESSENTIALS STRATEGY 201 U.S. Identifying the Differences Between VIX Spot and Futures CONTRIBUTOR Berlinda Liu Berlinda.liu@spdji.com The S&P Dow Jones Indices Practice Essentials series is a

More information

THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH

THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH It is essential to find new ways or asset classes to deliver consistent and uncorrelated returns within the asset management

More information

Reliance Dual Advantage Fixed Tenure Fund IV Plan C

Reliance Dual Advantage Fixed Tenure Fund IV Plan C Reliance Dual Advantage Fixed Tenure Fund IV Plan C (A Close Ended Hybrid Scheme) NFO Opens: 17 th September 2013 NFO Closes: 30 th September 2013 NFO Price: Rs.10 Per Unit Reliance Dual Advantage Fixed

More information

Understanding Margins

Understanding Margins Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

More information

Algorithmic Trading Session 1 Introduction. Oliver Steinki, CFA, FRM

Algorithmic Trading Session 1 Introduction. Oliver Steinki, CFA, FRM Algorithmic Trading Session 1 Introduction Oliver Steinki, CFA, FRM Outline An Introduction to Algorithmic Trading Definition, Research Areas, Relevance and Applications General Trading Overview Goals

More information

Investing in Alternatives. Help optimize your portfolio with non-traditional solutions.

Investing in Alternatives. Help optimize your portfolio with non-traditional solutions. Investing in Alternatives. Help optimize your portfolio with non-traditional solutions. Eagle Strategies LLC is an investment adviser registered with the Securities and Exchange Commission and is notice

More information

A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India ABSTRACT

A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India ABSTRACT Rev. Integr. Bus. Econ. Res. Vol 2(1) 223 A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India S. Kevin Director, TKM Institute of Management, Kollam, India

More information

Corporate and Investment Banking. Standard Bank Africa Commodity Index Exchange Traded Note

Corporate and Investment Banking. Standard Bank Africa Commodity Index Exchange Traded Note Corporate and Investment Banking Standard Bank Africa Commodity Index Exchange Traded Note Introduction to Commodities as an Asset Class 2 The Standard Bank Africa Commodity Index 4 Standard Bank s Blue

More information

Warrants Presentation

Warrants Presentation Place partner logo here on Title master Warrants Presentation Richard Hirsch : Corporate Investment Banking 18.05.2004 Agenda Introduction Warrant Overview Terms Calls Puts Comparing costs The Greeks Hedging

More information

Forum. Protection Strategies: Thinking beyond the VIX. A meeting place for views and ideas. Thomas Gillespie PhD, Director, Investment Risk Advisory

Forum. Protection Strategies: Thinking beyond the VIX. A meeting place for views and ideas. Thomas Gillespie PhD, Director, Investment Risk Advisory Forum A meeting place for views and ideas Protection Strategies: Thinking beyond the VIX Published September 2012 Authored by: Thomas Gillespie PhD, Director, Investment Risk Advisory Scott Maidel CFA

More information

Understanding Margins. Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE

Understanding Margins. Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Understanding Margins Frequently asked questions on margins as applicable for transactions on Cash and Derivatives segments of NSE and BSE Jointly published by National Stock Exchange of India Limited

More information

Alternative Investing

Alternative Investing Alternative Investing An important piece of the puzzle Improve diversification Manage portfolio risk Target absolute returns Innovation is our capital. Make it yours. Manage Risk and Enhance Performance

More information

Hedge funds: the case for trading strategies

Hedge funds: the case for trading strategies Hedge funds: the case for trading strategies Pictet Alternative Advisors SA 2014 A successful trading strategy is able to adjust a portfolio s risk profile rapidly to short term market conditions, regardless

More information

Swing Trade Warrior Chapter 1. Introduction to swing trading and how to understand and use options How does Swing Trading Work? The idea behind swing trading is to capitalize on short term moves of stocks

More information

A constant volatility framework for managing tail risk

A constant volatility framework for managing tail risk A constant volatility framework for managing tail risk QuantValley /QMI, Annual Research Conference, New York 2013 Nicolas Papageorgiou Associate Professor, HEC Montreal Senior Derivative Strategist, Montreal

More information

Foreign Exchange Investments Discover the World of Currencies. Private Banking USA

Foreign Exchange Investments Discover the World of Currencies. Private Banking USA Foreign Exchange Investments Discover the World of Currencies Credit Suisse Securities (USA) llc Private Banking USA 2 Foreign exchange: There s no ignoring the largest market in the world. Introduction

More information

Note on New Products in F&O Segment. 2. Options Contracts with Longer Life/Tenure. 6. Exchange-traded Currency (Foreign Exchange) F&O Contracts

Note on New Products in F&O Segment. 2. Options Contracts with Longer Life/Tenure. 6. Exchange-traded Currency (Foreign Exchange) F&O Contracts Note on New Products in F&O Segment Contents 1. Mini Contracts in Equity Indices 2. Options Contracts with Longer Life/Tenure 3. Volatility Index and F&O Contracts 4. Options on Futures 5. Bond Index and

More information

An introduction to Value-at-Risk Learning Curve September 2003

An introduction to Value-at-Risk Learning Curve September 2003 An introduction to Value-at-Risk Learning Curve September 2003 Value-at-Risk The introduction of Value-at-Risk (VaR) as an accepted methodology for quantifying market risk is part of the evolution of risk

More information

Investing In Volatility

Investing In Volatility Investing In Volatility By: Anish Parvataneni, CFA Portfolio Manager LJM Partners Ltd. LJM Partners, Ltd. is issuing a series a white papers on the subject of investing in volatility as an asset class.

More information

Hedge funds: the case for trading strategies

Hedge funds: the case for trading strategies Hedge funds: the case for trading strategies Pictet Alternative Advisors SA 2015 A successful trading strategy is able to adjust a portfolio s risk profile rapidly to short term market conditions, regardless

More information

Are you protected against market risk?

Are you protected against market risk? Are you protected against market risk? The Aston Hill Capital Growth Fund provides low volatility access to U.S. equities with a strong focus on downside protection. Since taking over management of the

More information

6. Foreign Currency Options

6. Foreign Currency Options 6. Foreign Currency Options So far, we have studied contracts whose payoffs are contingent on the spot rate (foreign currency forward and foreign currency futures). he payoffs from these instruments are

More information

A GUIDE TO AUSTRALIAN FIXED INCOME INVESTING

A GUIDE TO AUSTRALIAN FIXED INCOME INVESTING A GUIDE TO AUSTRALIAN FIXED INCOME INVESTING The Australian fixed income market vs the Australian share market The Australian share market is dynamic. On any given trading day, share prices may move rapidly

More information

Option Valuation. Chapter 21

Option Valuation. Chapter 21 Option Valuation Chapter 21 Intrinsic and Time Value intrinsic value of in-the-money options = the payoff that could be obtained from the immediate exercise of the option for a call option: stock price

More information

Return to Risk Limited website: www.risklimited.com. Overview of Options An Introduction

Return to Risk Limited website: www.risklimited.com. Overview of Options An Introduction Return to Risk Limited website: www.risklimited.com Overview of Options An Introduction Options Definition The right, but not the obligation, to enter into a transaction [buy or sell] at a pre-agreed price,

More information

Measuring Volatility in Australia

Measuring Volatility in Australia CONTRIBUTOR Berlinda Liu Director Global Research & Design berlinda_liu@spdji.com How is VIX computed? Select first and second month OTM puts and OTM calls Compute implied volatility for each maturity

More information

Study on the Volatility Smile of EUR/USD Currency Options and Trading Strategies

Study on the Volatility Smile of EUR/USD Currency Options and Trading Strategies Prof. Joseph Fung, FDS Study on the Volatility Smile of EUR/USD Currency Options and Trading Strategies BY CHEN Duyi 11050098 Finance Concentration LI Ronggang 11050527 Finance Concentration An Honors

More information

Aurora Updates Aurora Dividend Income Trust (Managed Fund) vs. Listed Investment Companies

Aurora Updates Aurora Dividend Income Trust (Managed Fund) vs. Listed Investment Companies Aurora Updates Aurora Dividend Income Trust (Managed Fund) vs. Listed Investment Companies Executive Summary 21 January 2014 The Aurora Dividend Income Trust (Managed Fund) is an efficient and low risk

More information

608 RISK BUDGETING AND INVESTMENT MANAGEMENT. Committee on Investments / Investment Advisory Committee August 24, 2006

608 RISK BUDGETING AND INVESTMENT MANAGEMENT. Committee on Investments / Investment Advisory Committee August 24, 2006 608 RISK BUDGETING AND INVESTMENT MANAGEMENT Committee on Investments / Investment Advisory Committee August 24, 2006 AGENDA Measuring Risk Active Risk Budgeting Risk UCRP Risk Budgets How Risk Budgets

More information

An Alternative Way to Diversify an Income Strategy

An Alternative Way to Diversify an Income Strategy Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed

More information

Xetra. The market. The leading trading platform. A simple investment in commodities, volatility or currencies

Xetra. The market. The leading trading platform. A simple investment in commodities, volatility or currencies Xetra. The market. The leading trading platform for ETCs & ETNs A simple investment in commodities, volatility or currencies 2 3 Commodities can be used to reduce the volatility of a portfolio or increase

More information

Diversifying with Negatively Correlated Investments. Monterosso Investment Management Company, LLC Q1 2011

Diversifying with Negatively Correlated Investments. Monterosso Investment Management Company, LLC Q1 2011 Diversifying with Negatively Correlated Investments Monterosso Investment Management Company, LLC Q1 2011 Presentation Outline I. Five Things You Should Know About Managed Futures II. Diversification and

More information

Volatility Derivatives

Volatility Derivatives Volatility Derivatives George Skiadopoulos Dept. of Banking and Financial Management, University of Piraeus & Financial Options Research Centre, University of Warwick Presentation at the Derivatives Forum

More information

Trading INR Options on DGCX

Trading INR Options on DGCX Trading INR Options on DGCX DGCX Options on INR/US$ Futures Contract Options on INR futures open the door to a host of versatile trading strategies; by using options alone, or in combination with INR futures,

More information

Concepts in Investments Risks and Returns (Relevant to PBE Paper II Management Accounting and Finance)

Concepts in Investments Risks and Returns (Relevant to PBE Paper II Management Accounting and Finance) Concepts in Investments Risks and Returns (Relevant to PBE Paper II Management Accounting and Finance) Mr. Eric Y.W. Leung, CUHK Business School, The Chinese University of Hong Kong In PBE Paper II, students

More information

Introduction to Equity Derivatives

Introduction to Equity Derivatives Introduction to Equity Derivatives Aaron Brask + 44 (0)20 7773 5487 Internal use only Equity derivatives overview Products Clients Client strategies Barclays Capital 2 Equity derivatives products Equity

More information

Investing in Volatility Strategies

Investing in Volatility Strategies Investing in Volatility Strategies An Introduction CAIA Educational Event Zürich, 3rd of December 2013 Dr. Daniel Hofstetter Table of Contents Investing in Volatility Strategies - An Introduction The term

More information

Binary options. Giampaolo Gabbi

Binary options. Giampaolo Gabbi Binary options Giampaolo Gabbi Definition In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options

More information

Capturing the volatility premium through call overwriting

Capturing the volatility premium through call overwriting By: Scott Maidel, CFA, CAIA, FRM, Senior Portfolio Manager DECEMBER 2010 Karl Sahlin, CPA, Portfolio Manager Capturing the volatility premium through call overwriting Systematic call overwriting strategies

More information

TRADING LEVERAGE ON EXCHANGE DAILY LEVERAGE PRODUCTS

TRADING LEVERAGE ON EXCHANGE DAILY LEVERAGE PRODUCTS London 28/09/2012 TRADING LEVERAGE ON EXCHANGE DAILY LEVERAGE PRODUCTS Trading the markets conference RISK WARNING The following products are suitable for sophisticated retail and professional investors

More information

Option Values. Determinants of Call Option Values. CHAPTER 16 Option Valuation. Figure 16.1 Call Option Value Before Expiration

Option Values. Determinants of Call Option Values. CHAPTER 16 Option Valuation. Figure 16.1 Call Option Value Before Expiration CHAPTER 16 Option Valuation 16.1 OPTION VALUATION: INTRODUCTION Option Values Intrinsic value - profit that could be made if the option was immediately exercised Call: stock price - exercise price Put:

More information

Fixed Income Arbitrage

Fixed Income Arbitrage Risk & Return Fixed Income Arbitrage: Nickels in Front of a Steamroller by Jefferson Duarte Francis A. Longstaff Fan Yu Fixed Income Arbitrage Broad set of market-neutral strategies intended to exploit

More information

Index Options Beginners Tutorial

Index Options Beginners Tutorial Index Options Beginners Tutorial 1 BUY A PUT TO TAKE ADVANTAGE OF A RISE A diversified portfolio of EUR 100,000 can be hedged by buying put options on the Eurostoxx50 Index. To avoid paying too high a

More information