The creative hedge

Equity derivatives


Hedge fund managers have had to endure a tricky few months. With equity markets plunging, volatility hovering close to recent highs and correlation on the rise, the across-the-board gains notched up by the hedge fund industry in 2006 have not been as easy to replicate. In this environment, portfolio insurance, once considered an unnecessary expense, has become increasingly important. But with rising volatility pushing the price of out-of-the-money index put options to prohibitively high levels,