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Alternative Market Briefing

EUREX sector futures volumes indicate revival of Artificial Risk Transfer

Thursday, August 24, 2017

Komfie Manalo, Opalesque Asia:

Over the last months Eurex could witness through its sector futures portfolio that a pronounced sector rotation has taken place, said Markus-Alexander Flesch, head of Global Sales Equity and Index Derivatives at Eurex.

Speaking at the latest Opalesque 2017 Nordic Roundtable, Flesh said that the ART (Artificial Risk Transfer) has seen a revival that has brought some of the more specialized Eurex products to the foreground.

He stated, "Sector rotation has been seen in the market since Brexit and later on by the success of President Trump last November. This 'ART' cycle develops as banks' structured products pair with distributors to issue yield enhancement products to retail investors. These products hold different risks, typically, volatility, skew, convexity and correlation risk."

Low volatility an outcome of missing consensus

Fellow Roundtable participant, Per Ivarsson, head of Investment Management from Stockholm-based managed futures specialist RPM added that managers are definitely trading more volatility.

In this discussion, which took place in July in Stockholm, Iverson stated he believes that the low volatility regime will not continue. He pointed to the fact that there has been a discussion among market participants why the volatility is so low when the geopoliti......................

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