Tunaru, Radu (2022) Equity portfolio trading with volatility and dividend derivatives. Journal of Derivatives, 29 (3). pp. 46-64. ISSN 1074-1240

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Abstract

In this article, I investigate trading strategies for equity portfolio analysis that considers diversification using dividend derivatives. The equity portfolio is assumed to be perfectly or highly correlated with the Euro STOXX 50® Index. The strategy employing dividend derivatives for hedging is compared with the more common strategy based on using VSTOXX® derivatives. I highlight that hedging with dividend derivatives offers a viable and possibly superior long-term alternative for hedging equity portfolios with stock index derivatives. In addition, I show that ATM volatility options could have been used successfully to hedge equity tail risk associated with the Brexit event in 2016 that caused a 9% drop in the Euro STOXX 50 immediately after the vote.

Item Type:	Article
Schools and Departments:	University of Sussex Business School > Accounting and Finance
SWORD Depositor:	Mx Elements Account
Depositing User:	Mx Elements Account
Date Deposited:	25 Mar 2022 08:18
Last Modified:	16 May 2022 10:01
URI:	http://sro.sussex.ac.uk/id/eprint/105020

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