Volatility Dependent Structured Products

Artem Dyachenko, Walter Farkas and Marc Oliver Rieger
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Walter Farkas: University of Zurich - Department of Banking and Finance; Swiss Finance Institute; ETH Zurich
Marc Oliver Rieger: University of Trier

No 19-64, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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.

Keywords: asset pricing; structured products; derivatives (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2019-12
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1964

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