Graduate papers
Description of the graduate paper
Form of studies Professional Master
Title of the study programm Business Administration
Title in original language Iespējamo zaudējumu ierobežošana zemas nestabilitātes akciju tirgū: VIX Reverse Collar opciju stratēģija
Title in English Hedging Downside Risk In a Low Volatility Market: The VIX Reverse Collar Option Strategy
Department 01B00 Riga Business School
Scientific advisor Raimonds Lieksnis
Reviewer W.Schaub
Abstract In a market that has seen an extended period of low volatility and rising equity valuations, what is an effective strategy for portfolio managers to lock in their gains and protect from downside risk? The problem that this paper will address is what is an effective means of portfolio hedging for investors to implement using volatility as an asset class. This paper will examine how volatility as an asset class is used as a means for mitigating portfolio risk. It will examine the market conditions leading up to the February 2018 US stock market correction, and provide an option strategy that would be effective in mitigating such risk in the future. The problem will be addressed by comparing and contrasting scholarly articles regarding volatility as an asset class and the recommendations that these articles have made. The February 2018 market correction with its record setting spike in volatility will be examined as a case study in relation to trading volatility. This paper will demonstrate that using volatility ETFs and ETNs, contrary to the recommendation of many scholarly articles is not an effective means of using volatility as an asset class an is actually quite detrimental to the financial well-being of investors. Finally, this paper will conclude that an effective means for using volatility as an asset class for hedging portfolio downside risk in a low volatility environment is to employ the VIX reverse collar option strategy.
Keywords Riska ierobežošana, Opcijas, Portfeļa pārvaldība
Keywords in English Hedging, Options, Volatility, Portfolio management
Language eng
Year 2018
Date and time of uploading 09.05.2018 00:34:42