Increased correlation with equities poses dividend dilemma

Ahead of the curve

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As a result of the de-risking that occurred after the Flash Crash in May last year, the movement in short-dated dividends showed a stark overreaction to the sell-off in equities. The meltdown was so severe that the price of dividend futures fell 11–14% in a single day, while the Eurostoxx 50 index was down only 4–5%. Though trading in dividends has largely stabilised, dealers are now worried about remaining within internal risk limits.

Estimates on the shape of the dividends future curve over th

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