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The Benefits of VSTOXX based Derivatives

Abs. Return Ann. Return Ann. Volatility Ann. Sharpe Ratio
EURO STOXX 50
VSTOXX
EURO STOXX 50 + VSTOXX
REMARKS

This backtesting application assumes that both the EURO STOXX 50 stock index and the VSTOXX volatility index are investable assets in which an investor can directly invest without transaction costs.

The value of the hypothetical portfolio (blue line) consisting of a EURO STOXX 50 and a VSTOXX position is normalized to equal 100% at the Investment Date. This portfolio is assumed to be rebalanced on a daily basis in such a way that the ratio (VSTOXX position value) / (portfolio value) is kept constant at e.g. 30% (or whatever target ratio is chosen).

If the target ratio for the VSTOXX position is chosen to be 0%, then the hypothetical portfolio consists only of a EURO STOXX 50 position and the portfolio's performance coincides with the stock index's performance (red line). On the other hand, if the target ratio is chosen to be 100%, then the portfolio mimics the VSTOXX index perfectly (green line).

Data is current as of .

Ratio of VSTOXX 0%
  1. 0%
  2. 20%
  3. 40%
  4. 60%
  5. 80%
  6. 100%