POST-CONFERENCE WORKSHOP 4: Exchange Traded Funds: Price dynamics, tracking errors, trading strategies, and option pricing

Speaker: Tim Leung, Assistant Professor, Department of Industrial Engineering and Operations Research, COLUMBIA UNIVERSITY

The first two sessions will be based on the price dynamics and trading of ETFs, and the afternoon sessions will focus on the derivatives associated with ETFs and their leveraged counterparts.

8:30 Registration and breakfast

9:00 Overview of the ETF market

  • Price dynamics of equity, commodity, and fixed income ETFs, and their leveraged counterparts
  • Quantification and analysis of tracking errors
  • Statistical analysis of leverage ETF returns

10:30 Morning coffee break

11:00 Discrete-time and continuous-time models: mathematical implications

  • Dynamic strategies to track a given benchmark
  • Static portfolio of ETF and leveraged ETFs, e.g. long-volatility, delta-neutral portfolio, mean-reverting pairs
  • Back-testing of strategies

12:30 Lunch

1:30 Market prices of leveraged ETF options

  • Analysis of empirical implied volatility surfaces
  • Tractable LETF option pricing under a general stochastic volatility framework, with implied volatility formulas for Heston, CEV, SABR, and other models
  • Implied volatility scaling to compare LETF option prices across leverage ratios

3:00 Afternoon coffee break

3:30 Futures-based ETFs: from term structure to ETF price dynamics

  • Impact of contango/backwardation, and the associated roll yields
  • Practical examples: futures and ETNs/ETFs for gold, oil & gas, VIX

5:00 End of workshop

Who should attend:

  • Buy side users
  • Market makers
  • Hedge fund managers

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