Volatility Exchange Traded Notes: a case study

Andrea Paltrinieri, Enrico Geretto and Maurizio Polato
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Andrea Paltrinieri: Università di Udine
Enrico Geretto: Università di Udine
Maurizio Polato: Università di Udine

BANCARIA, 2017, vol. 12, 64-72

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

JEL-codes: G10 G13 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ban:bancar:v:12:y:2017:m:december:p:64-72

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