Cayetano, Gea (2007): Studying the Properties of the Correlation Trades.
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This thesis tries to explore the profitability of the dispersion trading strategies. We begin examining the different methods proposed to price variance swaps. We have developed a model that explains why the dispersion trading arises and what the main drivers are. After a description of our model, we implement a dispersion trading in the EuroStoxx 50. We analyze the profile of a systematic short strategy of a variance swap on this index while being long the constituents. We show that there is sense in selling correlation on short-term. We also discuss the timing of the strategy and future developments and improvements.
|Item Type:||MPRA Paper|
|Original Title:||Studying the Properties of the Correlation Trades|
|English Title:||Studying the Properties of the Correlation Trades|
|Keywords:||dispersion trading, correlation trading, variance swaps, correlation swaps, p&l, pricing, strategies, equity derivatives|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C60 - General
|Depositing User:||Cayetano Gea|
|Date Deposited:||26. Apr 2010 07:10|
|Last Modified:||12. Feb 2013 21:41|
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Studying the Properties of the Correlation Trades. (deposited 30. Oct 2008 03:03)
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