PT  - JOURNAL ARTICLE
AU  - Geoffrey J. Warren
TI  - Can Investing in Volatility Help Meet Your Portfolio Objectives?
AID  - 10.3905/jpm.2012.38.2.082
DP  - 2012 Jan 31
TA  - The Journal of Portfolio Management
PG  - 82--98
VI  - 38
IP  - 2
4099  - https://pm-research.com/content/38/2/82.short
4100  - https://pm-research.com/content/38/2/82.full
AB  - Warren evaluates investing in volatility products under a range of investor objectives, including risk and return at the total portfolio level, benchmark-relative performance, and liability-aware investing. He shows that the potential role for volatility exposure depends on investor circumstances. Long positions in forward variance swaps or longer-dated VIX futures can be effective for hedging equity-related risk within balanced portfolios, but do so at the cost of exacerbating benchmark-relative risk and may be of limited benefit in certain liability-aware situations. Investors best placed to capture the volatility risk premium through shorting volatility include those with higher tolerance for total portfolio and benchmark-relative risk, longer investment horizons, or interest rate–sensitive liabilities.TOPICS: VAR and use of alternative risk measures of trading risk, interest-rate and currency swaps, equity portfolio management