Hedging Strategies
RJA designs hedging strategies that carefully balance the tradeoffs between risk, return, and cost
while enhancing long-term risk-adjusted returns.
while enhancing long-term risk-adjusted returns.
Volexity Hedge Strategy
Stabilized Returns Strategy
VOLEXITY HEDGE STRATEGY
- An “always-on”, low-carry tail risk hedge that capitalizes on the convex relationship between equity implied volatility and market returns during severe market declines
- Captures the following phenomena that often occur during large and sustained market selloffs:
- Strong, negative correlation between equity index returns and option-implied volatility
- Inversion of the equity-implied volatility surface as short-dated volatilities rapidly increase
- Strategy performance is driven by prudently balancing the three “C”s of tail-risk hedge construction: costs, convexity, and correlation
