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Volatility Dependent Structured Products

Author

Listed:
  • Artem Dyachenko

    (University of Trier - Faculty of Economics)

  • Walter Farkas

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; ETH Zurich)

  • Marc Oliver Rieger

    (University of Trier)

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 our product has a Sharpe ratio that is at least as high as the Sharpe ratio of the SPY. If one could invest $10,000 either in the product or the SPY at the end of 2008, the payoff of the product would be around $80,000 at the end of 2018 whereas the payoff of the SPY - around $30,000.

Suggested Citation

  • Artem Dyachenko & Walter Farkas & Marc Oliver Rieger, 2019. "Volatility Dependent Structured Products," Swiss Finance Institute Research Paper Series 19-64, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1964
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    More about this item

    Keywords

    asset pricing; structured products; derivatives;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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