News category: Opinion

EQDerivatives has launched its fifth Equity And Volatility Market Mapping project to tap into the views of key investors and asset managers around the globe as they grapple with the dislocation of 2020. The annual deep dive yields a comprehensive dataset of buyside preferences and strategies favored – and avoided with our respondent partners. Buysiders

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Since the Global Financial Crisis of 2008, the volatility investing community has done so much in educating global institutional investors on how volatility strategies can optimize portfolios, provide effective risk management and diversification. Many of the positives to come out of this market crash have featured examples from institutional investors of how embracing volatility as

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View or download the latest edition of EQDerivatives’ magazine here! This quarter’s magazine digs into the rapidly growing phenomenon that is multi-asset investment strategies. Is it a long-term trend, or a temporary haven for volatility portfolio managers sheltering from the low-vol storm? And what, exactly, is it all about? We dive into this topic in

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We are living in times of extreme economic uncertainty: trade wars are raging between the U.S. and China, and South Korea and Japan; political upheaval is rocking markets, from Brexit to the protests in Hong Kong; unprecedented monetary policy experiments, negative rates, inverted yield curves – the list goes on, and on.

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Economics Nobel Prize winner Harry Markowitz has said that diversification is the only free lunch in finance. In efficient markets, asset returns are driven by market factors and abnormal returns cannot be achieved by using common market information. Hence, the only rational portfolio choice for investors is to diversify portfolio risk by allocating to different

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While there is little dispute among investors and academics that the volatility risk premium (VRP) is a long-term structural feature of markets, it remains an overlooked investment for many (after all, it is not the same as naked option short selling, it is systematic harvesting of the volatility risk premia or implied volatility minus realized volatility). After the equity VRP enjoyed a strong performance in 2017, last year was more challenging, given the combination of several market shocks and the transition of implied volatility from low to more normal levels. Despite this backdrop, a well-structured multi-asset VRP portfolio weathered 2018 well after a strong 2017 and started 2019 convincingly.

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The Ides of March will be here before you know it. “Beware! Beware!”, said the soothsayer. The wall of worry will have crumbled by then: federal shutdown no more, trade war with China might be resolved, the Fed is no longer stubborn. Many of the factors that brought down U.S. equities in Q4 2018 might be behind us. At which point if you are Calpurnia, you might be having premonitions that the equity market rally might come to an end, and might ask Julius Caesar: Baby, did you buy any puts yet?

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Why have alternative risk premia returns been so disperse this year? It’s the question we’ve heard again and again in the last couple of months. Everyone from allocators to banks to the funds themselves is puzzled. It has something to do with scale, some say. Some strategies have been mis-labeled or mis-marketed. The models are broken. It’s because of style drift. Or is it liquidity?

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Several major events that transpired in 2016 are being discounted as insignificant. However, the question remains; were last year’s happenings the flapping of butterflies’ wings that will cause a hurricane elsewhere in the not too distant future? Facts are often overlooked by markets until they’re big and staring at it, and even then, some investors refuse to face reality until the data has smacked them right in the face.

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