I am preparing to write a research finishing my Msc. assessing various subjects on the matter of volatility. Specifically whether adding long volatility to a tradition asset portfolio is able to add any value in terms of risk return in a broad sense, due to the assumed negative correlated between the two. My doubt arises when it seems to me that weighting down on equities would provide the same kind of “hedge” or alternatively buying equity puts. Where tweaking the equity weights would prevent the negative rollover spread incurred by going long on volatility using derivatives. Especially from the viewpoint of private investors vis a vis institutional parties.
Alternatively I want to assess whether adding short volatility exposure would improve risk return characteristics, whether is it possible to capture the volatility spread and improve portfolio risk return over the long term.
What are your thought on the subject and the feasibility of such a study.
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.