Volatility Dependent Structured Products
Swiss Finance Institute Research Paper No. 19-64
Forthcoming in The Journal of Investing
Posted: 23 Dec 2019 Last revised: 27 Jul 2020
Date Written: July 21, 2020
Abstract
We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product's Sharpe ratio is higher than the SPY Sharpe ratio. If we invest $10000 into the product, the products' payoff is around $60000 at the end of 2018. In comparison, if we invest $10000 into the SPY, the SPY payoff is around $30000.
Keywords: asset pricing, structured products, derivatives
JEL Classification: G12, G13
Suggested Citation: Suggested Citation
Dyachenko, Artem and Farkas, Walter and Rieger, Marc Oliver, Volatility Dependent Structured Products (July 21, 2020). Swiss Finance Institute Research Paper No. 19-64, Forthcoming in The Journal of Investing, Available at SSRN: https://ssrn.com/abstract=3507456 or http://dx.doi.org/10.2139/ssrn.3507456
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