@article {Dyachenko53, author = {Artem Dyachenko and Walter Farkas and Marc Oliver Rieger}, title = {Volatility Dependent Structured Products}, volume = {30}, number = {2}, pages = {53--60}, year = {2021}, doi = {10.3905/joi.2020.1.162}, publisher = {Institutional Investor Journals Umbrella}, abstract = {We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product{\textquoteright}s Sharpe ratio is higher than the SPY Sharpe ratio. If we had invested $10,000 into the product, the product{\textquoteright}s payoff would have been about $60,000 at the end of 2018. In comparison, if we invested $10,000 into the SPY, the SPY payoff would be only about $30,000.TOPICS: Asset-backed securities, real assets/alternative investments/private equity, CLOs, CDOs, and other structured credit, analysis of individual factors/risk premia, derivativesKey Findings▪ We construct a volatility dependent derivative (product) that includes the SPY and the in-the-money VIX put option.▪ The product incorporates both the market risk premium and the variance risk premium.▪ The Sharpe ratio of the product is higher than the Sharpe ratio of the SPY.}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/30/2/53}, eprint = {https://joi.pm-research.com/content/30/2/53.full.pdf}, journal = {The Journal of Investing} }