Building a Long Volatility Strategy without Using Options – III

A systematic approach to creating portfolio protection

INTRODUCTION

We started our exploration of long volatility strategies by analyzing the Eurekahedge Long Volatility Hedge Fund Index and highlighted that this would have provided investors with attractive diversification benefits since 2004. However, the index suffers from survivorship bias and requires investors to conduct due diligence on mostly complex option-based strategies, which are rather unattractive features (read Building a Long Volatility Strategy without Using Options).