Directional Exposure to Volatility via Listed Futures Agosto

8/13/2019 Directional Exposure to Volatility via Listed Futures Agosto

http://slidepdf.com/reader/full/directional-exposure-to-volatility-via-listed-futures-agosto 1/14

|S&P INDICES Research & Design October 2010

Access to Volatility via Listed Futures

In certain asset classes, spot is not easily tradable by a broad spectrum of marketparticipants. For these asset classes, futures and indices can provide broaderaccessibility.

Volatility has emerged as an important asset class in the last decade. Often referred toas “the investor fear gauge,” it can be a potentially useful diversification tool in a broadequity portfolio, especially in down markets. However, it is not possible to trade the spotVIX® directly.

Prior to 2009, the only way to take a position on the VIX was through the use of VIXoptions, futures, or OTC vehicles such as variance swaps. A variety of instrumentslinked to the S&P 500 VIX Futures Index Series now offer replicable, directionalexposure to volatility.

The correlations of the futures indices to the S&P 500 range from -76.59% to -79.17%,similar to the approximately -75% correlation of the spot VIX to the S&P 500. Thesefutures indices have a positive return 95% of the time the S&P 500 has a loss of morethan 1%. Furthermore, during days of sharp market declines, index returns are usuallysignificantly positive.

Futures indices track only a fraction of the spot VIX movement due to lower volatility inthe futures than the spot. Despite a healthy correlation of 87% between the S&P 500VIX Short-Term Futures Index and the spot VIX, the index has a beta of only 44%versus spot VIX.

Term structure decay occurs when the futures curve is in contango. As a result, futuresindices move downward for the majority of their history, except for periods of extremestress and volatility.

In the S&P 500 VIX Short-Term Futures Index, on average, 0.16% of the portfolio valueis lost daily by rolling from first month to second month futures. Term structure decay isless pronounced in the S&P 500 VIX Mid-Term Futures Index. This decay has spurredthe creation of several dynamic roll indices, much like what has occurred in thecommodities market.

Berlinda LiuDirector

212.438.7834

[email protected]

Srikant Dash, CFA, FRMManaging Director

212.438.3012

srikant_dash@ sandp.com



Access to Volatility via Listed Futures October 2010

IntroductionIn certain asset classes, spot is not easily tradable by a broad spectrum of market participants. Acommon example is commodities such as base metals or natural gas. However, futures and futures-based indices can provide broader access to such asset classes. In recent years, this idea has been

extended to volatility.

Volatility has emerged as an important asset class in the last decade. VIX is a widely used measure ofthe implied volatility of the S&P 500 index options. It represents the market expectation of stock marketvolatility over the next 30 day period. Analysis of volatility shows that it hits its highest levels duringperiods of market turbulence; hence, VIX is often referred to as “the investor fear gauge.” VIX can beconsidered a useful diversification tool in a broad equity portfolio, especially during bear markets.

However, it is not possible to trade the spot VIX directly. Prior to 2009, the only way to take a positionon the VIX was through the use of VIX options, futures, or OTC vehicles such as variance swaps. Thatchanged in January 2009 when S&P Indices launched the S&P 500 VIX Futures Index Series. Avariety of popular exchange traded products linked to these indices offer broad market access to

volatility trading. The series includes two indices:

S&P 500 VIX Short-Term Futures Index. Measures the return from a rolling long position inthe first and second month VIX futures contracts. The index maintains a constant one-month maturity by rolling continuously throughout each month from the first month VIXfutures contract into the second month VIX futures contract.

S&P 500 VIX Mid-Term Futures Index. Measures the return from a rolling long position inthe fourth, fifth, sixth and seventh month VIX futures contracts. The index maintains aconstant five-month maturity by rolling continuously throughout each month from the fourthmonth contract into the seventh month contract while maintaining positions in the fifth monthand sixth month contracts.

In this paper, we elaborate on the portfolio hedge and distributional properties of VIX futures basedindices versus those of spot VIX. We also demonstrate the impact of the term structure, and quantifyhow it manifests itself in roll loss.

Diversif ication PropertiesAs in the VIX index spot, the S&P 500 VIX Futures Index Series and the S&P 500 tend to move inopposite directions or, in other words, are strongly negatively correlated. As shown in Exhibit 1, whilethe correlation between the spot VIX and the futures index series is not perfect, it is a healthy 87.23%for the short-term index and 78.68% for the mid-term index. More importantly, the correlations of theshort-term index and mid-term index to the S&P 500 are -79.17% and -76.59%, respectively, closelyapproximating the -74.93% correlation of spot VIX with the S&P 500. Exhibit 2 shows that this inverserelationship holds over time.

2S&P INDICES | Research & Design




Exhibit 1: Correlation of Indices with VIX and the S&P 500(Dec. 2005 – Aug. 2010)

S&P 500 VIX IndexS&P 500 VIX Short-Term

Futures Index

S&P 500 VIX Mid-Term

Futures Index

S&P 500 100% -74.93% -79.17% -76.59%

VIX Index 100% 87.23% 78.68%

S&P 500 VIX Short-Term

Futures Index 100% 63.26%


Futures Index 100%

Exhibit 2: 21 Trading Day Rolling Correlation with the S&P 500(Dec. 2005 – Aug. 2010)

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10

S&P 500 VIX Short-Term Futures Index vs. S&P 500 VIX Spot Vs. S&P 500

Source: S&P Indices, BloombergSM. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs areprovided for illustrative purposes only. S&P Indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypotheticalhistorical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested indexdata and performance information.





Exhibit 2 (Continued): 21 Trading Day Rolling Correlation with the S&P 500(Dec. 2005 – Aug. 2010)

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%


S&P 500 VIX Mid-Term Futures Index vs. S&P 500 VIX Spot Vs. S&P 500

Source: S&P Indices, Bloomberg. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs areprovided for illustrative purposes only. S&P Indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypothetical

historical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested indexdata and performance information.

Exhibit 3 below shows that daily falls in the S&P 500 are highly likely to be accompanied by rises in theVIX spot and the two VIX futures indices.

Exhibit 3: Probability of VIX Rises Given Particular S&P 500 Falls(Dec. 2005 – Aug. 2010)

VIXS&P 500 VIX Short Term

Futures Index


Futures Index

< 0 79.70% 79.14% 77.44%

<-0.5% 92.93% 92.93% 88.75%

< -1% 94.69% 94.69% 95.65%

<-1.5% 95.49% 96.24% 97.74%

Probability of Going UpS&P 500

Daily Return

Source: S&P Indices, Bloomberg. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs areprovided for illustrative purposes only. S&P Indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypotheticalhistorical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested indexdata and performance information.





Particularly during periods of market stress, the rise in the two VIX futures indices is substantial, asshown in Exhibit 4. This relationship is even clearer if one looks at the year 2008, one of the worstyears for U.S. equity markets in recent history (see Exhibit 5). The negative correlation between thetwo VIX futures indices and the S&P 500 is most beneficial during market downturns.

Exhib it 4: 20 Biggest Daily S&P 500 Falls from Dec. 2005 to Aug. 2010

Date S&P 500 VIX

S&P 500 VIX Short-

Term Futures Index


Futures Index

10/15/2008 -9.46% 22.80% 13.13% 8.06%

12/1/2008 -9.35% 21.46% 12.01% 10.02%

9/29/2008 -9.20% 29.63% 13.11% 7.99%

10/9/2008 -7.92% 10.53% 9.50% 4.92%

11/20/2008 -6.94% 8.51% 5.15% 4.81%

11/19/2008 -6.30% 9.34% 9.34% 6.33%

10/22/2008 -6.27% 27.11% 9.85% 6.41%

10/7/2008 -5.91% 3.08% 9.17% 0.74%

1/20/2009 -5.43% 20.59% 12.06% 5.86%11/5/2008 -5.35% 13.37% 6.32% 5.73%

11/12/2008 -5.28% 7.85% 7.44% 2.81%

11/6/2008 -5.13% 15.46% 11.12% 4.62%

2/10/2009 -5.03% 6.71% 6.11% 2.10%

9/15/2008 -4.83% 21.14% 5.84% 3.09%

9/17/2008 -4.83% 17.85% 5.57% 3.15%

3/2/2009 -4.77% 12.74% 6.35% 2.08%

2/17/2009 -4.64% 12.53% 4.25% 2.54%

4/20/2009 -4.37% 14.36% 7.44% 3.33%

3/5/2009 -4.34% 5.34% 4.52% 0.98%

11/14/2008 -4.24% 10.28% 7.29% 3.44% Source: S&P Indices, Bloomberg. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs are

provided for illustrative purposes only. S&P Indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypotheticalhistorical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested indexdata and performance information.





Exhibit 5: S&P 500 and S&P 500 VIX Futures Index Series in 2008

50

100

150

200

250

300

350

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09

S&P 500

S&P 500 VIX Short-Term Futures Index

S&P 500 VIX Mid-Term Futures Index

Source: Standard & Poor’s. Charts and graphs are provided for illustrative purposes only. Indices are statistical composites and their returns do not includepayment of any sales charges or fees an investor would pay to purchase the securities the index represents. Such costs would lower performance. It is notpossible to invest directly in an index. Past performance is not an indication of future results. The S&P 500 VIX Futures Index Series was launched on January22, 2009 with a base date of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflectshypothetical historical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actualperformance. Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested index data and performance information.

Beta with the Spot VIXIt is important to note that, as illustrated in Exhibit 4, the spot VIX moves more than futures, and hence,more than the two VIX futures indices. Exhibit 6 shows the rolling 21 trading day beta of the twoindices with the VIX spot. Overall, the short-term index has a beta of 44% with the VIX spot, and themid-term index has a much lower beta of 22%. This is because the futures market is usually lesssensitive than the spot to equity market movement. Furthermore, this sensitivity declines with longerdated contracts. Exhibit 7 shows that the spot VIX is more volatile than the two VIX futures indices.





Exhibit 6: Rolling 21-Trading Day Beta with VIX Spot(Dec. 2005 – Aug. 2010)

0%

20%

40%

60%

80%

100%









Exhibit 7: Trailing 60 Trading Day Volatility(Dec. 2005 – Aug. 2010)

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%


S&P 500 VIX Spot

S&P 500 VIX Short-Term Futures Index S&P 500 VIX Mid-Term Futures Index

Source: S&P Indices, Bloomberg. Charts and graphs are provided for illustrative purposes only. Indices are statistical composites and their returns do not includepayment of any sales charges or fees an investor would pay to purchase the securities the index represents. Such costs would lower performance. It is notpossible to invest directly in an index. Past performance is not an indication of future results. The S&P 500 VIX Futures Index Series was launched on January22, 2009 with a base date of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflectshypothetical historical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actualperformance. Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested index data and performance information.

Term Structure DecayIntuitively, as volatility is not a return-generating asset, its value should vary in the vicinity of its mean.However, term structure decay results in the index declining for most periods. In other words, the pricereceived for the sale of the shorter term contract is generally less than that paid for the longer term, asexpected VIX is generally greater than current VIX. Additionally, the spread between the shorter termfutures and the longer term futures is generally bigger on the front month contracts. This feature is notunique to VIX futures – commodity markets often experience these conditions, a phenomenon knownas contango.

To quantify the term structure decay, on a given trading day t, we define

t j

t

i

t

j

t

t w

P

PP RollCost

*

wherei

t P = the close of the i-th month futures that the index sells on day t. i=1 for the S&P 500 VIX

Short-Term Futures Index; i=4 for the S&P 500 VIX Mid-Term Futures Index. j

t P = the close of the j-th month futures that the index buys on day t. j=2 for the S&P 500 VIX

Short-Term Futures Index; j=7 for the S&P 500 VIX Mid-Term Futures Index.

t w = the percentage of the index that is rolled from the i-th month futures to the j-th month

futures on day t.





In the S&P 500 VIX Short-Term Futures Index, among the 1181 trading days between December 20,2005 and August 31, 2010, a positive roll cost occurred on 871 days (73.75%). On average, 0.16% ofthe portfolio value was lost daily by rolling from the first month futures to the second month futures.

In the S&P 500 VIX Mid-Term Futures Index, however, a positive roll cost occurred on 666 days(56.39%) in the same period. On average, 0.02% of the portfolio value was lost daily by rolling from thefourth month futures to the seventh month futures.

Exhibit 8: Roll Cost of the S&P 500 VIX Futures Index Series(Dec. 2005 – Aug. 2010)

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10


-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10







The impact of the term structure decay is clearly evident in the performance of the S&P 500 VIXFutures Index Series, as seen in Exhibit 9. The S&P 500 VIX Short-Term Futures Index movesdownward for the majority of its history, except for the period of extreme stress and volatility in the latterpart of 2008.

Exhibit 9: Index Returns(Dec. 2005 – Aug. 2010)

0

100

200

300

400

500

600

700

800


S&P 500

VIX Spot



Source: S&P Indices, Bloomberg. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs areprovided for illustrative purposes only. S&P indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the Indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypotheticalhistorical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested Indexdata and performance information.

Exhibit 10 shows that in most calendar years, the daily returns of the short-term index are generallynegative. The pattern is less pronounced for the mid-term index. Overall, less than 38% of the dailyreturns of the short-term index are positive.

Exhibit 10: Percentage Number of Positive Return Months f rom S&P 500 VIXFutures Index Series

S&P 500 VIX Short-Term

Futures Index


Futures Index

2006 16.67% 33.33%

2007 50.00% 58.33%

2008 58.33% 75.00%

2009 25.00% 50.00%

Jan 2010 - Aug 2010 37.50% 50.00%

Jan 2006 - Aug 2010 37.50% 53.57% Source: S&P Indices, Bloomberg. Correlations are calculated using daily returns from December 20, 2005 through August 31, 2010. Charts and graphs areprovided for illustrative purposes only. S&P Indices are rules based statistical composites and their returns do not include the payment of any sales charges orfees an investor would pay to purchase the securities the Indices represent. Such costs would lower performance. Past correlation and performance is not anindication of future results. It is not possible to invest directly in an Index. The S&P 500 VIX Futures Index Series was launched on January 22, 2009 with a basedate of December 20, 2005. All data presented from December 20, 2005 at the market close to January 22, 2009 at the market close reflects hypotheticalhistorical performance based on a number of assumptions. Data from January 22, 2009 at the market close through August 31, 2010 is actual performance.Please see the Performance Disclosure at the end of this document for more information on some of the inherent limitations associated with back-tested Indexdata and performance information.




11


S&P INDICES | Research & Design

A potential use of the term structure decay is to short the S&P 500 VIX Short-Term Futures Index. Ashort position would basically act as a volatility arbitrage strategy, which generally delivers positivereturns but breaks down during periods of stress such as the last quarter of 2008. For investors whouse the S&P 500 VIX Futures Index Series as a diversification tool in a broad equity portfolio, however,

the term structure decay (especially in the S&P 500 VIX Short-Term Futures Index) is the inevitablecost of a passive hedging strategy. This cost has spurred the development of a second generation of“smart” indices, which use algorithmic strategies to either roll or package dynamic allocations ofequities with volatility.




S&P Indices Global Research & Design Contact Information

Global Head

Srikant Dash +1 212-438-3012 srikant_dash@

standardandpoors.com

New York

Berlinda Liu +1 212-438-7834 berlinda_liu@ standardandpoors.com

Frank Luo +1 212-438-5057 [email protected]

Aye Soe +1 212-438-1677 aye_soe@ standardandpoors.com

Peter Tsui +1 212-438-1493 peter_tsui@ standardandpoors.com

London

Gareth Parker +44 207-176-8443 [email protected]

Beijing

Liyu Zeng +86 10-6569-2947 liyu_zeng@ standardandpoors.com

Hong Kong

Simon Karaban +852 2532-8050 [email protected]

Additional ResourcesS&P Indices Thought Leadership: www.indexresearch.standardandpoors.comS&P Indices Market Attributes: www.marketattributes.standardandpoors.com


mailto:[email protected]


















http://www.indexresearch.standardandpoors.com/

http://www.facebook.com/pages/SP-Indices/161630018534?elq=d2cfc1838bbb4184b37e8306fb3da62c

http://www.linkedin.com/groupRegistration?gid=2426754

http://twitter.com/hsilverb

http://www.indexresearch.standardandpoors.com/





















http://twitter.com/hsilverb

http://www.linkedin.com/groupRegistration?gid=2426754

http://www.facebook.com/pages/SP-Indices/161630018534?elq=d2cfc1838bbb4184b37e8306fb3da62c



13


S&P INDICES | Research & Design

Performance Disclosure

The S&P 500 VIX Futures Index Series (“Index Series”) is a composite index. The index series is comprised of the S&P 500 VIX Short-TermFutures Index, measuring the return from a daily rolling long position in the first and second month VIX futures contracts, and the S&P 500 VIXMid-Term Futures Index, measuring the return from a daily rolling long position in the fourth, fifth, sixth, and seventh month VIX futures

contracts. It is not possible to invest directly in an S&P index. Past performance of an index is no indication of future results.

The S&P 500 VIX Futures Index Series was launched on January 22, 2009 at the market close with a base date of December 20, 2005. Alldata from December 20, 2005 at the market close through January 22, 2009 at the market close is back-tested data that was calculated usingthe methodology that was in effect when the Index Series was launched. Data from January 22, 2009 at the market close through August 31,2010 is actual performance. The Index Series is calculated daily and rebalanced daily to maintain a constant maturity.

Prospective application of the methodology used to construct the Index may not result in performance commensurate with the backtest returnsshown. The backtest period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paperthe index, available at www.standardandpoors.com for more details about the Index, including the manner in which it is rebalanced, and thetiming of such rebalancing and index calculation. The index is rules based, although the Index Committee reserves the right to exercisediscretion, when necessary.

The index performance shown has inherent limitations. The index return shown does not represent the results of actual trading of investorassets. Standard & Poor’s maintains the Index and calculates the Index levels and performance shown or discussed, but does not manageactual assets. Indices are statistical composites and their returns do not reflect payment of any sales charges or fees an investor would pay topurchase the securities they represent. The imposition of these fees and charges would cause actual and backtested performance to be lower

than the performance shown. For example, if an index returned 10 percent on a $100,000 investment for a 12-month period (or $10,000) andan annual asset-based fee of 1.5 percent were imposed at the end of the period (or $1,650), the net return would be 8.35 percent (or $8,350)for the year. Over 3 years, an annual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative grossreturn of 33.1%, a total fee of $5,375 and a cumulative net return of 27.2% (or $27,200).




Disclaimer

This document does not constitute an offer of services in jurisdictions where Standard & Poor’s or its aff iliates do not have the necessarylicenses. Standard & Poor’s receives compensation in connection with licensing its indices to third parties.

All information provided by Standard & Poor’s is impersonal and not tailored to the needs of any person, entity or group of persons. Standard& Poor’s and its affiliates do not sponsor, endorse, sell, promote or manage any investment fund or other vehicle that is offered by third parties

and that seeks to provide an investment return based on the returns of any Standard & Poor’s index. Standard & Poor’s is not an investmentadvisor, and Standard & Poor’s and its affiliates make no representation regarding the advisability of investing in any such investment fund orother vehicle. A decision to invest in any such investment fund or other vehicle should not be made in reliance on any of the statements setforth in this document. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefullyconsidering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared byor on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by Standard& Poor’s to buy, sell, or hold such security, nor is it considered to be investment advice.

Exposure to an asset class is available through investable instruments based on an index. It is not possible to invest directly in an index.There is no assurance that investment products based on the index will accurately track index performance or provide positive investmentreturns. Standard & Poor's is not a tax advisor. A tax advisor should be consulted to evaluate the impact of tax-exempt securities onportfolios and the tax consequences of making any particular investment decision.

Standard & Poor’s does not guarantee the accuracy and/or completeness of any Standard & Poor’s index, any data included therein, or anydata from which it is based, and Standard & Poor’s shall have no liability for any errors, omissions, or interruptions therein. Standard & Poor’smakes no warranties, express or implied, as to results to be obtained from use of information provided by Standard & Poor’s and used in thisservice, and Standard & Poor’s expressly disclaims all warranties of suitability with respect thereto. While Standard & Poor’s has obtained

information believed to be reliable, Standard & Poor’s shall not be liable for any claims or losses of any nature in connection with informationcontained in this document, including but not limited to, lost profits or punitive or consequential damages, even if it is advised of the possibilityof same. These materials have been prepared solely for informational purposes based upon information generally available to the public fromsources believed to be reliable. Standard & Poor’s makes no representation with respect to the accuracy or completeness of these materials,the content of which may change without notice. The methodology involves rebalancings and maintenance of the indices that are madeperiodically during each year and may not, therefore, reflect real-time information.

Analytic services and products provided by Standard & Poor’s are the result of separate activities designed to preserve the independence andobjectivity of each analytic process. Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-publicinformation received during each analytic process. Standard & Poor's and its affiliates provide a wide range of services to, or relating to, manyorganizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financialintermediaries, and accordingly may receive fees or other economic benefits from those organizations, including organizations whosesecurities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address.

Copyright © 2010 by Standard & Poor’s Financial Services LLC. All rights reserved.

Redistribution, reproduction and/or photocopying in whole or in part is prohibited without written permission.S&P, S&P 500, and STANDARD & POOR’S are registered trademarks of Standard & Poor’s Financial Services LLC.

CBOE Volatility Index and VIX are registered trademarks of Chicago Board Options Exchange, Incorporated. The methodology of the CBOEVolatility Index is owned by CBOE and may be covered by one or more patents or pending patent applications.

Research by S&P Indices’ Global Research & Design provokes discussion on investment matters related to benchmarking in the asset

management, derivatives and structured products communities.

The series covers all asset classes and is often used to float new indexing concepts or explain substantive changes to well-known S&P indices.

Contact us to receive future reports: [email protected]

www.indexresearch.standardandpoors.com

Directional Exposure to Volatility via Listed Futures Agosto

Documents

Transcript of Directional Exposure to Volatility via Listed Futures Agosto