Sep 28, 2011

Basket of Volatility: Koop Eens Een Mandje Volatiliteit

Readers from Netherlands, or anyone who speaks Dutch can enjoy this concise yet informative introduction from DB analyst Knut Huy to US and European volatility derivatives and how they can act as an insurance for equity portfolios.
Koop Eens Een Mandje Volatiliteit 
Nameer dan een decennium van kommer en kwel op de markten vinden veel beleggers het nog te vroeg om in dit barre beursklimaat volop de kaart van de aandelen te trekken. Alternatieven lijken schaars: staatspapier en cash brengen weinig op en grondstoffen worden steeds meer de speelbal van speculanten. Investeren in volatiliteit kan een uitweg biede.
One things I could add is to be weary of backtested VSTOXX futures performance which (as I have written before) is unrealistic, and is probably based on theoretical marks, and not on actual trades.

As we are talking about VSTOXX I think one things is worth mentioning: Since Monday Sep 26 CBOE extended trading hours for VIX futures. Now they start trading at 8 AM EST. Since VSTOXX futures close at 18:30 Zurich time (12:30 EST), this brings total overlap between contracts to four and a half hours. The contracts are highly correlated, and although exchange rate remains a risk I think there are interesting opportunities for statistical arbitrage between the contracts. I am doing research on such possible strategy, and will blog about it once I get some results.

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