Volatility & Overlay – Long Volatility
Philosophy
Volatility tends to be high during periods of increased anxiety and low during periods when there is more appetite for risk, but it also tends to return to average levels over time. It is possible to exploit this secular behaviour through a strategy investing in volatility with a contrarian style. The Long Volatility strategy aims to increase exposure to volatility when it is low and sell it back when it is high.
The strategy thus seeks to benefit from volatility spikes and volatile markets and thus generate diversifying returns within an allocation. Conversely, during calm market conditions, the strategy may suffer negative carry costs. This is why it is in the investor's interest to consider this strategy consistently in the portfolio allocation over the long term.
Key Points
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A clear return proposal
Generate a diversified return in volatile market conditions in exchange for a cost of carry in calm markets
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Active management
Active daily monitoring strengthened by the consistency of mathematical tools developed by our experts
Investment Strategy
The Long Volatility strategy consists in an exposure to equity market volatility through flexible and quantitative allocation using statistical tools developed by volatility experts.
Objective
To generate performance in volatile market conditions.
Investment Universe
Volatility of US equity markets (S&P 500 index) and European equity markets (Eurostoxx 50 index) through liquid and listed instruments (derivatives on indices).
