Monetization Matters: Active Tail Risk Management and The Great Virus Crisis

Posted: 10 Aug 2020

See all articles by Vineer Bhansali

Vineer Bhansali

LongTail Alpha, LLC

Linda Chang

LongTail Alpha, LLC

Jeremie Holdom

LongTail Alpha, LLC

Marcy Rappaport

LongTail Alpha, LLC

Date Written: July 21, 2020

Abstract

We discuss monetization strategies for both “Left” and “Right” tail risk hedging to illustrate potential benefits of active management of hedges. In particular, by including actual data from the sharp COVID-19 pandemic related market correction and subsequent rebound of 2020 we quantify how monetization strategies have the ability to improve the performance of portfolio hedges. This extends previous work on active tail risk hedging published in this journal. We conclude that active management of tail hedging can result in significant increases in the efficacy of tail hedging.

Keywords: Tail Risk Hedging, Monetization, COVID-19

JEL Classification: G01

Suggested Citation

Bhansali, Vineer and Chang, Linda and Holdom, Jeremie and Rappaport, Marcy, Monetization Matters: Active Tail Risk Management and The Great Virus Crisis (July 21, 2020). Available at SSRN: https://ssrn.com/abstract=3668370 or http://dx.doi.org/10.2139/ssrn.3668370

Vineer Bhansali (Contact Author)

LongTail Alpha, LLC ( email )

500 Newport Center Drive
Suite 820
Newport Beach, CA 92660
United States

Linda Chang

LongTail Alpha, LLC

500 Newport Center Drive
Suite 820
Newport Beach, CA 92660
United States

Jeremie Holdom

LongTail Alpha, LLC ( email )

500 Newport Center Drive
Suite 820
Newport Beach, CA 92660
United States

Marcy Rappaport

LongTail Alpha, LLC

500 Newport Center Drive
Suite 820
Newport Beach, CA 92660
United States

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