CBOE RMC Day 2 Recap

When you attend a conference like CBOE Risk Management you hope to have the opportunity to hear a variety of speakers.  This has always been true for RMC.  However, there are usually market themes that persist from presentation to presentation.  For instance at RMC in Europe a few months ago there was a lot of discussion about the markets moving to a higher volatility regime.  What is interesting about this conference is that the variety of market outlooks matches the variety of the speakers.  To try to sum it up in a single phrase, the market theme at CBOE RMC is that there is no real consensus theme.

Today began with a welcome address from Edward Provost President and COO of CBOE Holdings.  He mentioned several new product initiatives and noted how strong the initial volume has been for SPX Weeklys with Wednesday expirations.  Full coverage of his address appears here – CBOE Holdings President and COO Edward Provost on Exchange’s New Initiatives.

The keynote address featured Leo de Bever Ph.D. who gave an excellent talk on looking at long term investing.  He noted that changes in technology are making measures like GDP as measures of prosperity.  His discussion was covered here – CBOE RMC Keynote – Investing for the Long Run:  An Opportunity Worth Seizing.

There were two panel discussions before and after lunch with the first on Options and Volatility Product Usage by Institutional Asset Owners bringing together several money managers who offered excellent insight into their approaches using derivatives as well as how their boards view their usage of listed and over the counter derivatives.  The second panel was a discussion of Differentiating and Benchmarking Volatility-Based Investment Strategies where the suite of Eurekahedge Volatility Indexes was discussed along with approaches managers use with respect to volatility as an asset class.

Three speakers got together for a session titled What Everyone Needs to Know About Listed Option Taxation.  This session focused on 1256 contracts and the benefits of some option based strategies versus similar non-option based strategies.

Rocky Fishman from Deutsche Bank and Philip Jones from Ameriprise were co-presenters for a session titled Equities & Rates:  Hybrid Options, Correlation and Risk Management.  They showed the uses and benefits of options that combine equity and fixed income components in equity-rate options.  It was noted that hedging costs can be lower using a hybrid option instead of a plain vanilla option.

One of the final presentations of the day was a discussion of hedging that made a compelling argument behind tail risk hedging strategies.  In Risk Hedging Frameworks: Governance Concerns and Equity Derivative Strategies Ari Paul argued for tail risk hedging while Rebecca Cheong discussed the decision between SPX and VIX hedging along with the choice between systematic or opportunistic hedging.

The final presentation brought together three VIX derivative market participants in a discussion titled Volatility of Volatility and Other Facets of VIX Options where it was noted that VIX Weeklys futures and options continue to gain traction.

That briefly sums up the day, but not the conference as there is more to go tomorrow.  We will continue to tweet interesting tidbits along with blogging session summaries in this space tomorrow.