One more practical research paper related to #20 – Volatility Risk Premium Effect
#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.
Notable quotations from the academic research paper:
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