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Volatility Exchange Traded Notes: a case study

Author

Listed:
  • Andrea Paltrinieri

    (Università di Udine)

  • Enrico Geretto

    (Università di Udine)

  • Maurizio Polato

    (Università di Udine)

Abstract

Over the last years, the financial engineering has developed a lot of complex financial instruments. Those products have flooded the financial market and are often traded by retail investors, without the needed knowledge to avoid substantial losses. The aim of this paper is to shed some light on a relatively new financial instrument, the Exchange Traded Note (Etn). Through a case study analysis, we show the complexity of the product, and the difficulties to track what it’s supposed to be its benchmark. In fact, we investigate an Etn trying to replicate the volatility index, Vix (Boost Sp500 Vix Sh-Ter Fut 2.25x Lev Day). Our results show that Etn performance are different compared to the benchmark due to the peculiarities of the Vix forward curve (contango and backwardation structure). We conclude our paper with some policy implication

Suggested Citation

  • Andrea Paltrinieri & Enrico Geretto & Maurizio Polato, 2017. "Volatility Exchange Traded Notes: a case study," BANCARIA, Bancaria Editrice, vol. 12, pages 64-72, December.
    • Handle: RePEc:ban:bancar:v:12:y:2017:m:december:p:64-72
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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