Hedging drives demand for Japan dividend futures

Moves by Japan structured product dealers to hedge out their long vega risk have created opportunities in the dividend swap markets for investors. But is this strategy really a one-way bet?

Finding yield is a complex task in current markets but Japanese investors have been facing this issue for longer than most as two decades of moribund domestic markets have driven them overseas – from the vanilla Aussie/Kiwi dollar carry trade to the more esoteric delights of the Brazilian real and the Turkish lira. But lately attention has shifted back to home, to the opportunities presented by dividends.

Japan dividend futures were listed on the Tokyo Stock Exchange (TSE) in 2010 – before then