Shopping Cart -

Your cart is currently empty.
Upgrade to today
for only an extra Cxx.xx

You get:

plus This issue of xxxxxxxxxxx.
plus Instant access to the latest issue of 340+ of our top selling titles.
plus Unlimited access to 30000+ back issues
plus No contract or commitment. If you decide that PocketmagsPlus is not for you, you can cancel your monthly subscription online at any time. Auto-renews at €10,99 per month, unless cancelled.
Upgrade for €1.09
Then just €10,99 / month. Cancel anytime.
Learn more
Pocketmags Digital Magazines
IT
Pocketmags Digital Magazines
   You are currently viewing the Italy version of the site.
Would you like to switch to your local site?
Leggi ovunque Read anywhere
Modalità di pagamento Pocketmags Payment Types
Trusted site
A Pocketmags si ottiene
Fatturazione sicura
Ultime offerte
Web & App Reader
Regali
Loyalty Points

Harvesting the S&P500 Volatility Risk Premium

And doing it in a risk-reduced way

FERI TRUST GmbH

The ultimate goal of an investor should be to identify and exploit attractive risk premia in capital markets. Risk premia and factor exposures have been intensively discussed in academic literature as a framework for decisionmaking processes in the area of Absolute Return and Hedge Fund investing. However, to practically extract a risk premium and to offer market participants an attractive investment opportunity requires a very structured approach. This article provides an insight on how to efficiently harvest the volatility risk premium in the US stock market (S&P500) through a regulated (UCITS IV) investment vehicle (OptoFlex I - ISIN: LU0834815101).

We define the attractiveness of a risk premium by its magnitude, stability and liquidity. Magnitude measured as the expected return implying whether a certain risk should be considered to be taken by an investor to receive a premium. As drawdowns of an investment should be minimised, the stability of a risk premium is important as well. Sufficient trading liquidity of a risk premium is also required to provide flexibility for potential exposure adjustment in case desired. Assuming that an available risk premium combines all three of the above we expect an investor to be adequately paid for taking such a risk in capital markets.

Below we demonstrate that the volatility risk premium in the US stock market (S&P500) is characterised by all three criteria defined above. The return expectation from harvesting the volatility risk premium is not only attractive in terms of the dimension, but also very stable in comparison to other capital market risk premia. Finally, the S&P500 volatility risk premium can be captured very efficiently in the most liquid derivative markets globally.

READ MORE
Purchase options below
Find the complete article and many more in this issue of -
If you own the issue, Login to read the full article now.