WORKSHOP 4, October 24: Fixed Income Market Volatility: Trading and Indexing

Led by Antonio Mele, Professor of Finance, UNIVERSITY OF LUGANO & Senior Chair, SWISS FINANCE INSTITUTE
and Yoshiki Obayashi, Managing Director, APPLIED ACADEMICS LLC

8:30 Registration and breakfast

9:00 From equity to fixed income volatility trading and indexing

  • Volatility in financial markets: an overview
  • Equity volatility trading & indexing: historical perspective
  • Fixed income volatility trading & indexing: recent developments
  • Preview of empirical dynamics of equity and interest rate volatilities

10:30 Morning coffee break

11:00 Fixed income volatility indexing methodology

  • What makes fixed income different from equity
  • Challenges and historical attempts
  • Model-free pricing and volatility indexing
  • A model-free measure of Treasury yield volatility

12:30 Lunch

1:30 Developments in fixed income volatility indexing and trading

  • Benchmark swap rate volatility index: CBOE SRVXSM
  • Benchmark Treasury volatility index: CBOE/CBOT VXTYNSM
  • Complementary roles of SRVX and VXTYN
  • Time deposits volatility trading and indexing
  • Credit volatility trading and indexing

3:00 Afternoon coffee break

3:30 Empirical behavior of fixed income volatility

  • Historical comparison of various fixed income volatilities
  • Variance risk-premiums, comparison across asset classes
  • Relative value
  • Relationship with sovereign and other macro risks
  • The Fed, monetary policy, and interest rate volatility hedging

5:00 End of workshop

Note: the 11am session will be technical and is best suited for attendees interested in quantitative methods.

About the workshop:

This workshop will equip participants with the background and knowledge needed to take advantage of opportunities arising from recent developments in standardization of fixed income volatility benchmarking and trading. The morning session begins with a retrospective on the explosive growth of standardized volatility trading in equity markets as the salient precedence for the emerging fixed income analogues, provides an overview of how fixed income volatility plays a role distinct from equity volatility, and introduces novel quantitative methodologies necessary for model-free volatility pricing of various interest rate and credit instruments. The afternoon session examines existing and potential applications of the quantitative methodologies in practice, and concludes with numerous empirical analyses that shed light on how trading in fixed income volatility benchmarks may provide new opportunities for risk management and alpha generation.

Learning objectives

  • Explore how new markets for standardized fixed income volatility can be used to add value to your business
  • Understand the role of volatility across different markets
  • Add novel model-free fixed income volatility methodologies to your quantitative toolbox
  • Learn about the empirical behaviour of fixed income volatility over different phases of the business cycle

Who should attend:

  • Fixed income portfolio managers
  • Multi-asset portfolio managers
  • Volatility fund managers
  • Macro fund managers
  • Tail risk fund managers
  • Interest rate traders
  • Interest rate structurers
  • Bond investors
  • Risk managers
  • Asset-liability managers
  • Interest rate researchers/strategists
  • Volatility researchers/strategists
  • Cross-asset researchers/strategists
  • Monetary policy makers and academics



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