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Advisor Perspectives, Volatility as an Asset Class

01 Oct 2010

Article by: Robert Huebscher
Published by: Advisor Perspectives
Date: 3 Feb 2009

“The concept of volatility as an asset class is the latest result of the never-ending
quest to create products for consumption by the investor community. But while
volatility might serve a useful purpose as a measure of investor sentiment, it is
only a true asset class for the marketing purposes of Wall Street’s financial
engineers.

“Examples of efforts to characterize volatility as an asset class include research
from Credit Suisse and a recent white paper from Standard and Poor’s.”

Full article: Link

 
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Posted in Investing ideas

 

By Garch, volatility trading works.

30 Sep 2010

Article by: Paul H. Lasky
Published by: Futures (Cedar Falls, Iowa)
Date: 1 Jul 2001

“Conditional variance is the concept that price changes go through cycles of small variations followed by large changes. Using sophisticated statistical models, we can predict conditional variance accurately for a variety of markets. Combined with a trader’s knowledge of those particular markets, a reliable trading model can result.

“Let’s face it: Few — very few — trading concepts are reliably and consistently profitable. The good ideas are discovered and traded to their inevitable unprofitability by their developers before the mass of traders discovers them. But this is unlikely to happen with volatility trading. The ever-changing and adaptive nature of modern stochastic volatility models should ensure some measure of long-lived usefulness.”

Full article: Link

 
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Posted in Trading ideas

 

Understanding VIX futures and options

30 Sep 2010

Article by: Dennis Dzekounoff
Published by: FuturesMag.com
Date: 18 Aug 2010

“Since the Chicago Board Options Exchange (CBOE) introduced futures and, subsequently, options on its Volatility Index, or VIX, traders have asked why the contracts don’t necessarily track the underlying in the same way other equity futures track their indexes. Others may wonder why the put-call parity is violated for VIX options. Then, there are the options that trade underwater, the vastly different implied volatilities for each expiration cycle and the question of arbitrage between S&P 500 derivatives and VIX contracts.

“Thankfully, all of these questions can be answered with theoretical research on VIX futures and options pricing and, along the way, can offer guidance to some practical applications of these products. Our findings also apply to recently launched VSTOXX index futures and options listed on Eurex.”

Full article: Link

 
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Posted in Hedging, Implied volatility, Trading ideas

 
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