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Volatility Managed Indexes: The Importance of Intraday Data

Ryan Poirier

Journal of Index Investing2021https://doi.org/10.3905/jii.2021.1.112article
ABDC C
Weight
0.26

What the paper says

Modern volatility managed indexes employ antiquated close-to-close volatility models to scale exposure. This has material consequences on the option pricing dynamics for structured investments, many of which reference a volatility managed index because of option pricing benefits associated with the constant volatility. The author tests two daily close-to-close models and three intraday “realized volatility” models that leverage the rich information dynamics found in intraday data. The results, across three highly liquid US large-cap indexes, suggest that the latter three models produce more consistent volatility profiles, or alternatively, a lower volatility of volatility, without sacrificing performance (i.e., the Sharpe ratio). All else being equal, this lower volatility of volatility should be preferred by product issuers and investors because of the resulting option pricing benefits.

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https://doi.org/https://doi.org/10.3905/jii.2021.1.112

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@article{ryan2021,
  title        = {{Volatility Managed Indexes: The Importance of Intraday Data}},
  author       = {Ryan Poirier},
  journal      = {Journal of Index Investing},
  year         = {2021},
  doi          = {https://doi.org/https://doi.org/10.3905/jii.2021.1.112},
}

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Evidence weight

0.26

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.20 × 0.15 = 0.03
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.