This chart compares The Valuation Exchange VolShare securities with
VIX futures, volatility ETNs, and delta-neutral
hedging.
|
Features
|
VolShares®
(realized volatility)
|
VIX
Futures
(implied volatility)
|
Volatility ETNs
(implied volatility)
|
Delta-Neutral
Hedging
(realized volatility)
|
|
Expires
to actual, or realized, volatility or variance
|
|
X
Expires to a forecast
|
X
Does not expire, and
does not converge to
realized volatility
|
X
Path dependency does not provide "pure" volatility
exposure
|
|
Appeals
to retail traders
|
|
X
Does not necessarily
react to changes in
realized volatility
|
|
X
Too complicated
|
|
Appeals
to option market-makers
|
|
?
Available on only a few
equity indices, and not
an effective hedge
|
X
Does not track vega and
gamma exposure |
|
|
Appeals
to investment banks and institutions
|
|
X
Not willing to risk capital on forecasting
a future forecast of volatility
|
X
Does not hedge
volatility exposure well
|
|
|
Appeals
to portfolio managers
|
|
?
So far, has worked only
based on S&P 500®
|
?
Possibly to those willing
to short volatility
|
X
Requires constant monitoring
|
|
Exchange-cleared
(regulated with no credit risk)
|
|
|
|
|
|
Not subject
to market manipulation
|
|
X
Special opening quote that depends on liquidity
|
|
?
Large swings in P&L possible due to inconsistent
marking policies
|
|
Transparency
and price discovery
|
|
|
|
|
|
Could
be traded on all assets
|
|
X
Only on very liquid
option markets
|
X
Only on markets with
liquid volatility futures
|
|
|
Easy
to calculate
|
|
X
Formula is complex and cannot be verified
without fee paid for data feed
|
?
May be difficult to deter-
mine
fair value without
the exact fund holdings
|
X
Calculation requires
execution prices and commissions for each
transaction
|
|
Execution
costs low
|
|
|
|
X
Market spreads and commissions on all legs
and follow-up trades
|
