
Volatility scaling unravels as market patterns shift
Waning power of quant approach could be a reason for trend following’s malaise

A technique widely used by quant investors to adjust their positions is struggling to cope with sudden bursts of volatility after long periods of market calm.
Many quant strategies use volatility scaling to size bets and determine levels of leverage for different assets – piling up the stake when markets are benign and clawing it back when they get fractious.
But several buy-siders tell Risk.net this balancing mechanism needs some rebalancing of its own.
“If you use a simple measure to scale
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Asset management
Derivatives
Callable repack frenzy opens up new options market in Europe
Demand driven mainly by French life insurers looking for alternatives to low-yielding sovereign bonds
Receive this by email