Performance & Volatility
Last valuation date : 19-01-2021
Risk / Return from02-01-2003
All information for an index prior to its Inception Date is back-tested, based on the methodology that was in effect on the Inception Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The key elements of the index methodology are available upon demand.
The NXS Europe Short Volatility is a dynamic strategy index exposed to financial markets through a basket of synthetic put options and call options on Eurostoxx 50 and a market index, the NXS European Equity Futures Index.
Delta Hedged Strangles.
The Index is therefore composed by two main mechanisms:
- The daily sales of a Eurostoxx 50 strangle, reflecting hypothetical sales of 2-week call Options and put Options on the Eurostoxx 50, where strike are chosen in order to target 20% delta. A transparent calibration of option prices to listed Eurex options is used.
- The dynamic delta hedge, calculated using a proprietary methodology that aims to benefit from the observed mean-reversion pattern of the Eurostoxx 50. The delta is calculated with a moving average spot over the past 5 days, and is hedged using Eurostoxx 50 futures (the NXS European Equity Futures Index). The Natixis Europe Short Volatility Strategy takes into account key factors such as strike risk, liquidity profile, vega profile and transparency.
Implied volatility tends to be higher than realised volatility. The difference between the two is known as the Volatility Risk Premium.
Extracting these premiums has historically been one of the most resilient risk premium strategies. In the equity space, volatility risk premia is a carry strategy captured through shorting the recurrent implied-to-realised volatility spread and derives its performance from structural market imbalances.
The strategy aims at generating a return in a low rates environment (hunt of yield/ Demand for a carry strategy) in order to profit from a structural market bias.