BAML tinkers with tradable volatility index for tail risk hedging
Bank of America Merrill Lynch has developed a liquid volatility index for institutions which are seeking a systematic tail risk hedge.
Bank of America Merrill Lynch (BAML) has created an Investible Volatility Index to serve the growing institutional demand in the US market for tail risk hedging.
"During the credit crisis, we started to see an overwhelming need from our investor group for tail risk hedges," says Yuriko Mita, co-head of Derivatives Sales at BAML in New York. Tail risk is the risk of an asset or portfolio moving more than three standard deviations from its current price.
"A lot of the flow we have been seeing in
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