Article by: Alberto Cherubini, Trevor Samols
Published by: Automated Trader Magazine, Issue 40
Date: Q3 2016
“Listed futures on VIX and its cousins give exposure to implied variance. But getting exposure to realised variance is very different and usually has been the realm of OTC variance swaps. Here we examine strategies to trade the realised variance using only listed instruments, with simple time-independent formulas not requiring models such as Black-Scholes.”
Full article: Link
Article by: Kenneth R. French, Richard Roll
Published by: Journal of Financial Economics
Date: 1986
“Asset prices are much more volatile during exchange trading hours than during non-trading hours. This paper considers three explanations for this phenomenon: (1) volatility is caused by public information which is more likely to arrive during normal business hours; (2) volatility is caused by private information which affects prices when informed investors trade; and (3) volatility is caused by pricing errors that occur during trading. Although a significant fraction of the daily variance is caused by mispricing, the behavior of returns around exchange holidays suggests that private information is the principle factor behind high trading-time variances.”
Full article (Requires subscription or purchase): Link
Article by: Edward Szado, Thomas Schneeweis
Published by: The Options Industry Council
Date: Sep 2009
“A study by Szado and Schneeweis found that a long protective collar strategy using six month put purchases and consecutive one month call writes earned far superior returns compared to a simple buy-and-hold strategy while reducing risk by almost 65%. The research evaluated more than ten years of data on the PowerShares QQQ exchange-traded fund (Ticker: QQQQ) and its associated options. The authors also extended the analysis to a more active implementation of the strategy. While the passive collar used a constant set of fixed rules, the active collar uses rules that adapt the collar to changing macroeconomic variables and market conditions. The active collar implementation generated higher returns than the passive implementation, while volatility was only slightly higher. Over the 122 month study period, the passive collar returned almost 150%, while the QQQ lost one-third of its value. The active collar outperformed both strategies and returned more than 200%. Finally, the study collared a small cap mutual fund. The return of the active mutual fund collar was four times the return of the fund, while the standard deviation was about one-third lower.”
Full article: Link
Article by: Julien Lascar
Published by: Societe Generale Corporate & Investment Banking
Date: Jun 2012
This is a presentation on volatility, tail hedging, and alternative investments given at the Asian Insurance Forum.
Full article (PDF): Link