Hedge funds harness volatility in turbulent markets
Trading volatility can help hedge funds to diversify their portfolios and generate alpha in a challenging market. Kris Devasabai and Stephen Quigley report on the strategies employed by volatility traders and its emergence as an asset class
Trading volatility as an asset class is a new, and at times confusing, concept. For many investors, the term volatility simply describes the range and speed of movements on a stock exchange or index.
However, savvy hedge fund managers and traders increasingly view volatility as an asset class that can help with portfolio diversification and generate significant returns in a turbulent market.
Volatility can be traded through instruments like volatility swaps, variant swaps, futures, correlation
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