@article {Tunarujod.2021.1.142, author = {Radu Tunaru}, title = {Equity Portfolio Trading with Volatility and Dividend Derivatives}, elocation-id = {jod.2021.1.142}, year = {2021}, doi = {10.3905/jod.2021.1.142}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In this article, I investigate trading strategies for equity portfolio analysis that considers diversification using dividend derivatives. The equity portfolio is assumed to be perfectly or highly correlated with the Euro STOXX 50{\textregistered} index. The strategy employing dividend derivatives for hedging is compared with the more common strategy based on using VSTOXX{\textregistered} derivatives. I highlight that hedging with dividend derivatives offers a viable and possibly superior long-term alternative for hedging equity portfolios with stock index derivatives. In addition, I show that ATM volatility options could have been used successfully to hedge equity tail risk associated with the Brexit event in 2016 that caused a 9\% drop in Euro STOXX 50 immediately after the vote.}, issn = {1074-1240}, URL = {https://jod.pm-research.com/content/early/2021/12/23/jod.2021.1.142}, eprint = {https://jod.pm-research.com/content/early/2021/12/23/jod.2021.1.142.full.pdf}, journal = {The Journal of Derivatives} }