Bank of America found answers to both. It was able to continue writing cliquets by rewiring the way the underlying indexes target fixed levels of volatility – a “fantastic solution”, according to one client. A short-vol strategy that decouples from the market at times of stress, meanwhile, raised more than $1 billion in just 10 months, with one investor describing it as “a game-changer”.
Innovations like these have been powering the growth of BofA’s equity derivatives business. Its book added $385 billion in notional during the 12 months to mid-2019, according to US regulatory disclosures – growth of 26%, which led all other big US dealers. At $1.85 trillion notional, the portfolio has more than doubled in five years.
0 Comments