The third and final day of the 29th annual CBOE Risk Management Conference began with a keynote address from Dean Curnutt, CEO, Macro Risk Advisors. In his presentation, "The Hundred Year Storm… Five Times in Twenty Years," Curnutt reviewed five RIPS (Risk In Plain Sight) events: Long Term Capital Management; Nasdaq bubble; Enron collapse; housing/credit crisis; and sovereign debt meltdown – each an instance where the market got it wrong, despite warning signs being very obvious. Curnutt says volatility events are about the shattering of a consensus. And, when looking at the current state of risk, he says the present environment reminds of him nothing in the past… perhaps a new normal.
Following the keynote, there were four breakout sessions. The "VIX ETPs, Interrelationships between Volatility Markets and Implications for Investors and Traders" session provided a timeline of the development of VIX-related products and several VIX-based strategies. Adding VIX – even a small fraction – to a portfolio can provide the benefit of risk-adjusted returns.
The "Portfolio Construction: Finding Options Where You Least Expect Them" session analyzed right versus left tail risk. Most funds focus on left tail risk and not enough on the right – or even the right of right. Also illustrated was a method of replicating an option position through underlying stock.
In "What Everyone Needs to Know About Listed Options Taxation" panel, three speakers provided an overview of options taxation issues. Highlighted were the proposed overhaul to the tax code by Congressman Dave Camp, which includes several modifications to the treatment of derivatives trading (i.e. repeal of 60/40); replicating structured notes with options; and using portfolio margining to increase liquidity from concentrated stock positions.
The "Volatility Management of Equity-Based Insurance Guarantees" session illustrated new product designs, including volatility control products, low volatility by stock selection and VIX-linked structures.
CBOE would like to thank all of our sponsors, presenters and attendees for making this year's event so successful. We hope to see you September 30-October 2 in Portugal for the second annual RMC Europe or next March in Florida for the 30th annual CBOE Risk Management Conference.
Photo of the Day
CBOE TV interviews Dean Curnutt, CEO, Macro Risk Advisors
Tweet of the Day
"Every VIXophile should be here at the "VIX Summit" which is formally known as the #CBOERMC" @VIXandMore.
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The three most discussed topics beyond the sessions today at RMC…
- What's the next 100 year storm? China? U.S debt? The Middle East?
- New VIX for Variable Annuities white paper.
- Dramatic volume in VIX ETPs the last few weeks.
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