Munich Personal RePEc Archive

Studying the Properties of the Correlation Trades

Cayetano, Gea (2007): Studying the Properties of the Correlation Trades.

This is the latest version of this item.


Download (401kB) | Preview


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.

Available Versions of this Item

MPRA is a RePEc service hosted by
the Munich University Library in Germany.