IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-3-031-86354-7_6.html
   My bibliography  Save this book chapter

Managing Volatility and Capturing Returns Through Derivatives

In: Derivatives Applications in Asset Management

Author

Listed:
  • Alexander Rudin

    (State Street Global Advisors)

  • Pravesh Kumar

    (State Street Global Advisors)

  • Shubham Upadhyay

    (State Street Global Advisors)

Abstract

This chapter describes advanced applications of derivatives in quantitative portfolio management, emphasizing their role in enhancing both risk-adjusted returns and absolute return potential. The first application, a Target Volatility Strategy (TVS), dynamically adjusts exposure to risky assets based on observed market volatility. A derivatives-free version of TVS demonstrates the limitations of lacking leverage, while an enhanced approach using equity futures introduces notional leverage, improving precision in risk targeting and boosting performance in low-volatility environments. The second application, a commodity carry strategy, captures absolute returns by exploiting the term structure of commodity futures. The strategy generates returns independent of market direction by holding long positions in backwardation markets and short positions in contango markets. The chapter illustrates how derivatives enable precise positioning, efficient capital allocation, and strategic flexibility in modern portfolio management through these examples.

Suggested Citation

  • Alexander Rudin & Pravesh Kumar & Shubham Upadhyay, 2025. "Managing Volatility and Capturing Returns Through Derivatives," Springer Books, in: Frank J. Fabozzi & Marielle de Jong (ed.), Derivatives Applications in Asset Management, chapter 0, pages 105-121, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-86354-7_6
    DOI: 10.1007/978-3-031-86354-7_6
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-3-031-86354-7_6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.