Nasdaq OMX Unveils Volatility Target Index

Nasdaq OMX Group announced that it will launch a new volatility index in conjunction with Deutsche Bank’s global asset management segment, a system it said is designed to limit risk for investors dealing on the Nasdaq-100 Index.

The DWS Nasdaq-100 Volatility Target Index will lower investor exposure to the Nasdaq-100 as volatility on it increases. But when volatility declines, the opposite happens and the new index increases investor exposure to the Nasdaq-100, the exchange operator said in a release.

The companies said the new system was designed to help investors navigate the increasingly volatile marketplace, while appealing to growing sensitivity to risk management across Wall Street.

“The ability to manage risk cannot be overemphasized in these volatile market conditions,” Nasdaq OMX executive vice president John Jacobs said in a statement. “The DWS Nasdaq-100 Volatility Target Index incorporates a volatility control mechanism, providing investors with adequate levels of exposure to world-class companies while limiting risk.”

The new system is also designed to appeal to traders deploying more sophisticated trading strategies, Chris Warren, the head of structured products at DWS Investments added.

“Recent market events combined with changing demographics have altered the investment landscape,” Warren added in the release. “Consequently, investment objectives are more complex than just going long in the market … Investment in a risk-controlled manner is critical given an increased focus upon wealth preservation.”

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio