Variance Swap Strategies

Investment Summary
The AM Variance Swap strategy invests in Stock Volatility Strategies, Interest Rates Swaps Strategies and Currency Volatility Strategies.

AssetMacro offers 300+ Investment Strategies with higher returns, lower risk and losses than the Variance Swap Strategy

Investment Performance (Learn How to Select Good Investments)
Investment Return (?): 14.20% Volatility (?): 7.50% Sharpe Ratio: 1.75 Maximum Drawdown: -12.40%

Investment Cumulative Performance
Volatility Trading

Investment’s Fundamental Concept:
Variance Swaps use Investment strategies generating High and Stable profits analogous to the long-term success of insurance companies. Volatility Investments aim to receive the volatility Risk premium. Variance Swap Strategies are executed using Variance Swaps and Volatility Swap.

Volatility Risk Premium is the return investor A gets as compensation for insuring investor B for risk of losses during sudden increases in market volatility and extreme market events like financial crisis. Technically, volatility premium is the profit gained from the difference between implied and realized volatility.

Investment’s Logic:

AssetMacro Variance Swaps Portfolio invests in Stock Volatility Strategies, Interest Rates Swaps Strategies and Currency Volatility Strategeis with equal weighting.

Each month equal weighting of capital is invested in the 3 volatility strategies described. If market indicator’s of any volatility strategy are risk off, the portfolio underinvested by not allocating risk to the remaining strategies.

Market Risk Indicators are implemented to filter calm market periods where significant risk losses are small and other periods where market risk is high. When the market is nervous implied volatility rates spike up and this the time to take risk off.

The Market Indicators used are the GARCH model and the Market Implied Data models

Annualized return of the strategy 14.20% with annualized volatility of just 7.50% generating a Sharpe Ratio of 1.75. The strategy’s returns are not correlated with other traditional asset classes like stocks and bonds. The correlation coefficient of returns between strategy and benchmark indices are close to zero.

Other Investment Strategy Characteristics:
Investment Type: Volatility Premium Investment Risk: 1/5 Low Backtest Range: 10-20 years Rebalancing period: Daily
Investment Strategy Markets:
  • Stock Volatility Strategies
  • Interest Rates Swaps Strategies
  • Currency Volatility Strategies