Two new strategies have been added:
#267 – Market Timing Using Lumber/Gold Ratio
#268 – Expected Skewness and Momentum in Stocks
Three new related research paper have been included into existing strategy reviews. And four additional related research paper have been included into existing free strategy reviews during last 2 weeks.
#20 – Volatility Risk Premium Effect
Authors: Donninger
Title: Hedging Adaptive Put Writing with VIX Futures : The Affenpinscher Strategy
Link: http://www.godotfinance.com/pdf/AffenPinscherStrategy_Rev1.pdf
Abstract:
In a previous working paper I analyzed the Austrian and Doberman Pinscher strategy. The Austrian is an adaptive Put Writing strategy. One hedges the short position with a long Put with a lower strike. The Doberman is more aggressive. The long hedge is omitted. The risk is in both cases reduced by entry and exit conditions. The Affenpinscher uses the same general framework. But the hedging is done with long VIX Futures. There are several VIX Futures available. One selects the VIX Future with the lowest roll-value. The overall performance of the Affenpinscher is between the Austrian and Doberman Pinscher. The Pinscher strategies have generally an attractive performance. The best choice within the family is a matter of risk appetite. Revision 1 extends the historic simulation for the SPX Options till 2014-06-13. As the original parameters are not changed we perform an out of sample test. The attractive properties of the strategy are confirmed. Revision 1 is added before the Conclusion of the original paper. A similar update has been done for the other Pinscher strategies.
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#198 – Exploiting Term Structure of VIX Futures
Authors: Donninger
Title: Selling Volatility Insurance: The Sidre- and Most-Strategy
Link: http://www.godotfinance.com/pdf/VIXFuturesTrading_Rev1.pdf
Abstract:
This working-paper examines and improves a VIX-Futures calendar-spread strategy proposed in the literature. The strategy relies on the typical term-structure of VIX-futures. Additionally a naked short-selling strategy is considered. The strategies have similar characteristics to selling Puts on the S&P-500. There is some risk, but also a lot of fun. The strategies are an interesting alternative investment-vehicle to boost the performance of a fund.
and …
Authors: Donninger
Title: VIX Futures Basis Trading: The Calvados-Strategy 2.0
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2379985
Abstract:
I developed in a previous working paper the Sidre and Most-Strategy. The strategy relies on the typical termstructure of VIX futures. The Calvados is a refined and condensed version of these strategies. The starting point was a paper of Simon and Campasano. The authors demonstrate that the VIX futures basis does not have significant forecast power for the change in the VIX spot index, but does have forecast power for subsequent VIX futures returns. It is especially profitable to short VIX futures contracts when the basis is in contango. The original Calvados working paper presented improved metrics and parameter settings of the Simon&Campasano approach. The current working paper improves the original work in several points and extends the historic backtest. The overall patterns of the original results are reassured and improved upon. The Calvados is traded in the Sybil-Fund. It is so far the pick of the bunch. One gets a lot of fun for a medium dose of risk.
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#21 – Momentum Effect in Commodities
#22 – Term Structure Effect in Commodities
Authors: Benham, Walsh, Obregon
Title: Evaluating Commodity Exposure Opportunities
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2602885
Abstract:
Commodities as an asset class have been in growing demand over the last 40 years, as investors that have traditionally held portfolios of stocks and bonds seek the ‘equity-like’ returns along with diversification potential and inflation hedging characteristics available through commodities investment. However, perhaps due to their relative complexity and the large remaining disagreements in the current literature about the fundamental drivers of commodities returns, investors do not universally agree on the merits of commodity investments. This paper begins by reviewing the existing theories and fundamental drivers of returns from commodity investments to better understand the risks that commodity investors are compensated for bearing. From this perspective we will evaluate existing methods of commodity investing with a focus on why the risk premia these strategies capture are likely to persist in the future.
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#20 – Volatility Risk Premium Effect
Authors: Li, Wang
Title: Option-Implied Downside Risk Premiums
Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2603857
Abstract:
This article examines downside risk premiums using S&P 500 index (SPX) options. Portfolios are constructed using the index options to replicate the downside risk factors and their average excess returns provide estimates of downside risk premiums. We show that all the market risk premium comes from the downside. The mimicking portfolio returns also show that most of the downside risk premium is associated with large market-level losses that are rarely observed. In contrast, investors seem to require little excess return for bearing moderate market-level losses. Therefore, the downside risk premium is largely a tail risk premium. We compare the downside risk premiums measured from stocks and the options to examine whether the risk is priced consistently across the two markets. Our evidence raises several concerns about the downside risk premium measures from the stock market. Overall, we find no robust evidence that downside risks are priced in the stock market in the same way as in the options market.
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One new strategy has been added:
#266 – Skewness Effect in Country Equity Indexes
Four new related research paper have been included into existing strategy reviews. And four additional related research paper have been included into existing free strategy reviews during last 2 weeks.
