Fimat Structuring Volatility Arbitrage Index

"We think it will be quite an active area," he said of volatility arbitrage. He added that managers are not just long volatility. These hedge funds trade the implied volatility vs. the actual volatility of an identical or related tradable asset. Implied volatility is the volatility indicated by the price of an option in the market as calculated by financial models such as the famous Black-Scholes options pricing model. The implied volatility is used to monitor market opinion about the future price behavior of an asset.

"We are seeing keen interest from investors for this type of strategy whose correlation characteristics are nil to negative to most other alternative investment strategies as well as being nil or minimal to general market prices in periods of financial stress," Mr. Teilhard de Chardin said.

His group, Fimat Global Fund Services is the prime brokerage team of Fimat International Banque SA (U.K. branch). The group is going beyond its prime brokerage client base to find volatility arbitrage funds to include in the index, in its global search. While Fimat is known as a prime brokerage firm, officials are also managers of market information and providers of alternative investment research. The Fimat Group, the global brokerage organization, is part of the Societe Generale Group.

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