Trade of the Month: Volatility as an asset class

Volatility has become the darlinig of structured products and has become so favoured that it is now talked of as a pseudo asset class. Tim Mortimer explains

The green light for volatility

Structured products and derivatives markets rely on the use of options as one of the fundamental building blocks to create products and manage risk. Options provide exposure to underlying markets and provide upside potential, manage downside risk or generate yield.

The price of options depends on volatility levels as a crucial input, so the implied volatility of an underlying asset will affect the terms that can be offered, while changes in volatility levels during the life of a product affect