Barcap launches equity volatility index family

Barclays Capital has launched a new index designed to exploit the volatility of equity markets. The Vertex index family uses a strategy based around implied volatility which the bank is mooting as an effective insurance tool for underlying equity investments as a result of its negative correlation.

The strategy works by increasing exposure and leverage when volatility is highest, which is when greater returns are most probable, holding both long and short positions in variance swaps of different maturities. It works under a rules-based mechanism and the signals to change exposure are quantitatively generated.