@article {Bri{\`e}re105, author = {Marie Bri{\`e}re and Alexandre Burgues and Ombretta Signori}, title = {Volatility Exposure for Strategic Asset Allocation}, volume = {36}, number = {3}, pages = {105--116}, year = {2010}, doi = {10.3905/jpm.2010.36.3.105}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Bri{\`e}re, Burgues, and Signori examine the advantages of incorporating strategic exposure to equity volatility into the investment opportunity set of a long-term equity investor. They consider two standard volatility investments: implied volatility and volatility risk premium strategies. An analytical framework, which offers pragmatic solutions for longterm investors who seek exposure to volatility, is used to calibrate and assess the risk{\textendash}return profiles of portfolios. The benefit of volatility exposure for a conventional portfolio is shown through a mean-modified Value at Risk portfolio optimization. A pure volatility investment makes it possible to partially hedge downside equity risk and thus reduce the risk profile of a portfolio, while an investment in the volatility risk premium substantially increases returns for a given level of risk. A well-calibrated combination of the two strategies enhances both the absolute and risk-adjusted returns of a portfolio.TOPICS: Volatility measures, VAR and use of alternative risk measures of trading risk, analysis of individual factors/risk premia}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/36/3/105}, eprint = {https://jpm.pm-research.com/content/36/3/105.full.pdf}, journal = {The Journal of Portfolio Management} }