Taxonomy of Tail-Hedging in the US Equity Market

Over the past few years, the financial markets have experienced significant volatility, ranging from the all-time high in 2021 to sudden fluctuations triggered by geopolitical events, high inflation and supply-demand issues. To navigate these turbulent headwinds, investors are increasingly turning to Quantitative Investment Strategy (QIS) based risk mitigation frameworks. These frameworks enhance portfolio resiliency and foster a defensive stance with balanced risk-mitigating profiles.

Constructing a risk mitigation analytical framework is a cumbersome exercise as it involves a range of distinct systematic indices, each with its own implementation characteristics.

We therefore provide a detailed analysis of tail-hedging within the US equity market, emphasizing rule-based strategies that employ derivatives on US equity and the VIX index. Through this analysis, we have developed a comprehensive taxonomy of the most effective defensive implementations. This taxonomy offers investors a thorough understanding of the reactivity, response magnitude, and correlation of these strategies with respect to stress events.

Unlock the potential of tail-hedging and systematic quantitative investment strategies to navigate the complexities of the US equity market and effectively mitigate your portfolio risk.

graph image

Download Article

Read the Full Article

Thank you for your interest. Please submit your information to receive this premium article.

Related Insights

Premialab Pension Fund Case Study

Seize the Momentum: Pension Funds Embrace Quant Investments

Discover the power of Premialab

Interested in learning more? Reach out to us to speak with one of our expert consultants.

Request a Demo