Another Look At Volatility Hedging

Can market volatility be tamed? Sure, but it comes at a price, usually in the form of reduced return. The real question is whether you can tame volatility without materially lowering expected return. Analysts have been dissecting this problem for years, although interest in the topic has exploded lately for obvious reasons. One of the more intriguing strategies is available through a new breed of hedging strategies designed by several large investment banks. A number of financial planners are using the products, which have been stress-tested during the recent market turmoil. How do these strategies hold up upon closer inspection? For some perspective, take a look at my article in the September issue of Financial Advisor.