Since I've blogged about VOLT ETF few weeks ago, I was able to obtain official Nomura document about the product. The document is very thorough, explaining in detail the phenomenon of positive correlation between vol of vol and volatility level. VOLT uses dynamic allocation, and trades (rather than invest) quite aggressively. Robustness of the strategy is also addressed by selecting different lookback windows for estimating vol of vol. Fwiw I would love to see the same analysis done using more efficient intraday realized vol of vol measures.
While it sees that the strategy is sound, and provides for a good hedge for a long portfolio, the strategy is complex and it is hard to estimate the potential of strategy failure in the future. My suggestion is if you're a trader to use the research (correlation between vol of vol and volatility) for your own strategies, and if you're an investor consider a small allocation because of the negative effect of the fees and trading costs.
Subscribe to:
Post Comments (Atom)
Weekly market report
Wall st delivered a mixed bag of news with VIX, VNKY, and VSTOXX and their underlying markets almost unchanged. VXD - volatility index based...
-
As I am sure all of you know Russia has began a full scale war against my home country Ukraine. Please make no mistake - Putin's goal ...
-
Many investors are looking at VIX and VSTOXX indexes as a leading indicators of volatility in equity markets, however many are confused by t... -
Deutsche Bank Currency Volatility Index was developed to provide an implied volatility benchmark for major currency markets. The index is d...
Could you provide a link to the more detailed Nomura document? Thanks.
ReplyDeleteA link would be great. thanks.
ReplyDelete