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Faculty of Business and Economics
AFIN806 Risk Management and Derivatives
Final Project Semester 1 / 2018Students are advised to focus on the issues discussed in the references and the knowledge on risk
management they have gained throughout the Lecture. However, students are also encouraged to
research and read widely to provide additional findings and arguments that go beyond what has been
reported in the provided references. The topic of your final report is:Understanding the VIX and the Trading of Volatility –
A Risk Management PerspectiveHereby, you should concentrate on the following issues:
– What is the Chicago Board Options Exchange’s Market Volatility Index (the VIX)? How is it
constructed and why has it become so important for financial markets?
– How can the VIX or financial products related to the VIX be used for risk management and
hedging in financial markets?
– What does empirical research suggest about the performance of exchange-traded products
(ETPs) linked to the VIX?
– What are Short Volatility Strategies? How are they used to create return for investors? What
risks do Short Volatility Strategies create for fund managers and for financial markets? How can
these risks be managed?
Questions regarding the essay may be asked via the Discussion Forum of the unit-homepage. Students
are advised to study the posted questions-and-answers exchange.Recommended References:Anson, M. and Ho, H. (2003), Short Volatility Strategies: Identification, Measurement, and Risk
Management, Journal of Investment Management, 1(2), pp. 30–43.
Bhansali, V. and Harris, L. (2018), Everybody’s Doing It: Short Volatility Strategies and Shadow
Financial Insurers, Financial Analysts Journal, 74(2), pp. 12–23.
Stanton, C. (2011), Volatility as an Asset Class, Journal of Investment Consulting, 12(1), pp. 23–30.
Whaley, R. (2000), The Investor Fear Gauge, The Journal of Portfolio Management, 26(3), pp. 12–17.
Whaley, R. (2009), Understanding the VIX, The Journal of Portfolio Management, 35(3), pp. 98-105.
Whaley, R. (2013), Trading Volatility: At What Cost? , The Journal of Portfolio Management, 40(1),
pp. 95-108.Assessment Criteria and Check List for Final Project
Assessment Criteria1. The project has to be structured by using headings and subheadings.
2. Make sure that the emphasis of your final project report is on thorough and lucid analysis (and
not on description only).
3. The document should contain critical evaluation (and not merely consist of a paraphrasing of
4. Address all the issues raised in the final project topic.
5. Define the relevant concepts and carefully explain hypotheses.
6. List all the references you have used and refer to them in the text.
7. Use footnotes where and when appropriate.
8. Comment on any statistics, graphs or other forms of empirical evidence referred to in the text.
It is not necessary to reproduce tables or graphs from the main reference-article in your project
report, though always clearly refer the numbered tables and figures…
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