Oct 21, 2014

Dispersion Trading

Recent video from Tasty Trade on volatility dispersion trading. I think they quite downplayed the complexity of the trade, they don't mention proper weighting design to achieve either correlation or covariance mispricing, and their delta-based approach makes sense only for ITM options.

Other correlation resources:
Fundamental Relationship Between An Index's Volatility And The Correlation And Average Volatility Of Its Components, by Sebastien Bossu, Yi Gu
Dispersion Trading in German Option Market, by Jonas Lisauskas
Studying the Properties of the Correlation Trades, by Cayetano Gea Carrasco
Analysis and Development Of Correlation Arbitrage Strategies on Equities, Yujin Chloe Choi
and best for the last  Dispersion Trading Reading List, from condoroptions.com


2 comments:

  1. I like your blog. However, white font on black background is tough on the eyes.

    Would you mind adjusting?

    Thanks .. G

    ReplyDelete
  2. I prefer white on black, and no one else has complained ... so, respectfully, no.

    ReplyDelete