Cboe Global Markets, Inc. (Cboe: CBOE), a provider of rule-based options for institutional investors, that creates the framework for Cboe and Validus to collaborate on the development of new indices and solutions.
Under this agreement, Cboe will have exclusive rights to develop and offer a range of derivatives-based indices and associated investable financial products using Validus’ proprietary methodologies. Cboe expects to launch a new series of Cboe Validus Dynamic Indices designed to showcase the performance of active BuyWrite and PutWrite strategies on major US equity indices in the coming months. In addition, Cboe may work with Validus to develop other active indices for unique index-based products in the future.
The new relationship furthers Cboe’s growing global business index and builds on Cboe’s proven track record in creating and disseminating some of the industry’s most innovative index offerings, including the Cboe Volatility Index® (VIX® Index), and its suites of Strategy Performance Benchmark indices and Target Outcome indices.
“At Cboe, we seek to innovate markets that benefit all participants. Often, this begins with indexing, which has long been a Cboe core competency, ”said Catherine Clay, Executive Vice President, Data and Access Solutions at Cboe Global Markets.
“Cboe has been a pioneer of strategy performance benchmark indices, which continues to gain traction with investors looking for options to hedge risk, reduce volatility and enhance yields. “We are excited about leveraging their expertise to help us develop additional index solutions to meet customer demand.”
“Validus is excited to partner with Cboe Global Markets, a global leader in indices and index products. Combining our risk-centric philosophy and derivatives expertise with Cboe’s focus on product innovation and world class trading infrastructure creates the ideal platform for the development of exciting investment products and risk solutions, ”said Kevin Lester, Chief Executive Officer at Validus Risk Management.
Validus’ proprietary methodologies differ from traditional options-based strategies in that they are active and rule-based at the same time. Characteristics such as options expiries, strikes or roll dates are dynamically selected. The new Cboe Validus Dynamic Indices, unlike many benchmark indices, are specifically designed to be used investable strategies by a wide range of investors. The indices also account for the impact of interest rates.
“We are very excited and grateful for the opportunity to work with investors,” said Kambiz Kazemi, Chief Investment Officer at Validus Macro Strategies. “Markets have been undergoing major structural shifts in the last two decades and the effects of these changes are now becoming apparent to investors. Options-based strategies and indices are vital to building portfolios and managing their risk. Through this partnership with Cboe, we look forward to bringing practical state-of-the-art solutions to investors and helping them navigate the road ahead. ”
The planned launch of the Cboe Validus Dynamic Indices will complement Cboe’s existing suite of Strategy Performance Benchmark indices, which will provide investors with effective strategies for improving their risk-adjusted returns within their investment portfolio.
A BuyWrite, which is generally considered to be an investment strategy in which the investor buys a stock or basket of stocks, and also sells call options that correspond to the stock or basket of stocks. A PutWrite generally covers the sale of put options to earn premiums.
As a leader in the creation and dissemination of more than 450 volatility and derivatives-based indices, Cboe is at the forefront of creating an investment ecosystem that encompasses product design, calculation, administration, listing, trading, and benchmark licensing. To learn more, visit https://www.cboe.com/indices/