Fimat Launching Volatility Arbitrage Index

January 27, 2003 ( - The Fimat Group, a division of the Société Générale Group, has announced preparations for the launch of the Fimat Volatility Arbitrage Strategies Index.

Fimat Global Fund Services, the United Kingdom branch of the prime brokerage team of Fimat International Banque SA, said the new index is due to be released in the coming weeks.   The index will be equally weighted and reporting will be conducted on a monthly basis in participating funds’ base currency, supplied as a Net Asset Value (NAV) per unit, according to a news media release.

Further, Fimat says it will ensure that the data is comprehensive and reliable by collecting it directly from the hedge fund managers and requiring audited financial statements.

Volatility Arbitrage

Volatility arbitrage strategies treat volatility as an asset class of its own. Funds specializing in these strategies trade the  volatility implied by the price of an option in the market, versus the actual volatility of an identical or related tradable asset.   From this data, funds will look for instances when the implied volatility of an option is inconsistent with historical or future observations provided by proxy instruments or correlated assets.

Additionally, volatility arbitrage funds enter in relative value or transformation trades that seek to benefit from market impacts momentarily created by trading flows and liquidity situations, a process known as volatility surface arbitrage.