Diversifying a Portfolio using VIX Options

Author

Alec J. Amos, University of Arkansas, Fayetteville

Date of Graduation

5-2014

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Finance

Advisor/Mentor

Santamaria, Sergio F.

Committee Member/Reader

Stamenov, Venstislav M.

Abstract

Ubiquitous investment strategies often include similar forms of diversification – holding stocks of differing industries, exposed to different business cycles, in order to reduce idiosyncratic risk. During the recession, these strategies failed as the markets fell substantially leaving investors exposed to great amounts of systematic, or “un-diversifiable” risk. Throughout this paper, I will examine the effects of diversifying a portfolio using call options on the CBOE Volatility Index (VIX) to try and alleviate systematic risk from a portfolio, allowing an investor to capitalize from short-term market fluctuations arising from financial, economic, and geopolitical risks.

Citation

Amos, A. J. (2014). Diversifying a Portfolio using VIX Options. Finance Undergraduate Honors Theses Retrieved from https://scholarworks.uark.edu/finnuht/6