Helder Palaro's home page - References

Volatility Arbitrage
Trend-following and momentum

Volatility Arbitrage References

1. Seminal work

2. Volatility stylized facts

2.1 Volatility clustering and mean reversion

2.2 Volatility risk premium

2.3 Leverage effect

2.4 Volatility smile and implied probability distribution

3. Forecasting volatility

3.1 ARCH/GARCH and time series models

3.2 Stochastic volatility models

3.3 Range-based estimators

3.4 Realized volatility models

3.5 Option-implied forecast of realized volatility

3.6 Comparison of volatility forecasting approaches

3.7 Forecasting implied volatility

4. Trading instruments

4.1 General

4.2 Currency options

4.3 Futures options

4.4 Naked straddle/strangles/ratio spreads

  • Chaput, J. and Ederington, L. (2005) Volatility trade design, The Journal of Futures Markets, 25 (3), 243-279.
  • Chaput, J. and Ederington, L. (2005) Ratio spreads, Proceedings of the Accounting and Finance Association of Australia and New Zealand Conference

4.5 Delta-hedging with transaction costs

4.6 Options exercise

4.7 Volatility/Variance swaps and futures

5. Volatility strategies

5.1 Long-only or short-only

5.2 Covered call

5.3 Directional and Relative value

5.4 Predicting underlying price using volatility

Trend-following and Momentum References

Helder Palaro

Email: helder@monaco.mc

Helder Palaro is an independent systematic trader, with interests in portfolio management, tactical asset allocation, volatility trading, trend following, and deep learning applied to finance.


Independent Systematic Trader, Monaco (2013-) - Research, development and execution of futures and options trading strategies.

Currently trading a volatility arbitrage strategy. The strategy aims to profit from the mispricing of volatility across options markets. It trades futures options markets across several asset classes: equity, bonds, currencies, energy, metal, buying and selling volatility through short-term options. The strategy is 100% systematic. The positions are taken according to a robust-fitted statistical model which takes in consideration the volatility premium, volatility mean-reversion and trendiness of the market. Delta and gamma (vega) risk are strictly controlled intraday.

Also trading a tactical asset allocation strategy, long-only, in the global liquid equity and bond future markets. This strategy aims to earn the risk premium existing in equity and fixed income asset classes but limiting the risk according to market volatility and regime.
Independent Quantitative Researcher, Malta (2011-2013) and Monaco (2013-2014)

Responsible for the research and development of the FundCreator risk management system, used by the AC Risk Parity family of funds, Aquila Capital, Hamburg. The system was unique in its capability to tightly control a large variety of risk parameters. The fund applied FundCreator on a daily basis to closely track its key risk parameters and to actively optimize the portfolio exposure, thereby ensuring a stable and predictable risk profile over time.
Quantitative Researcher, AHL, Man Group, London UK (2007-2010)

Worked within the volatility arbitrage team. Created strategies for volatility trading using options across several asset classes and strategies for optimal delta-hedging.
PhD in Finance, Cass Business School, City University, London UK (2004-2007)
Kat, H and Helder Palaro (2007) Replication-Based Evaluation of Hedge Fund Performance.
Kat, H and Helder Palaro (2006) Hedge Fund Indexation the Fundcreator Way: Efficient Hedge Fund Indexation without Hedge Funds.
Kat, H and Helder Palaro (2006) Tell Me What You Want, What You Really, Really Want! An Exercise in Tailor-Made Synthetic Fund Creation.
Kat, H and Helder Palaro (2006) Replication and Evaluation of Funds of Hedge Funds Returns, in Fund of Hedge Funds: Performance, Assessment, Diversification and Statistical Properties (eds: Greg Gregoriou), Chapter 3, Elsevier Press.
Kat, H and Helder Palaro (2005) Who Needs Hedge Funds? A Copula-Based Approach to Hedge Fund Return Replication ,
Kat, H and Helder Palaro (2005) Hedge Fund Returns: You Can Make Them Yourself! , Journal of Wealth Management 8, 62-68.
MSc in Statistics, State University of Campinas, Brazil (2002-2004)
Hotta, L K; Lucas, E C and Helder Palaro (2008) Estimation of VaR using Copula and Extreme Value Theory, Multinational Finance Journal 12 (3/4), 205-218.
Hotta, L K and Helder Palaro (2006) Using Conditional Copulas to Estimate Value at Risk, Journal of Data Science 4 (1), 93-115.
BSc in Statistics, State University of Campinas, Brazil (1998-2001)
Embedded Systems Programmer, PST Electronics, Campinas, Brazil (1996-1998) Designed Microchip PIC machine-language software for car alarms, power windows and other automotive products.
Electronics Technician, Technical high school of Campinas, Brazil (1993-1996) Electronics, digital circuits, power engineering, telecommunications, control systems, signal processing, instrumentation.

Editorial Work

Referee (2017-), Communication in Statistics.
Referee (2012-), Brazilian Journal of Probability and Statistics.
Referee (2012-), Statistics and Probability Letters.
Referee (2011-), Communications in Statistics - Simulation and Computation.
Referee (2010-), The Journal of Risk.
Referee (2009-), Asia Pacific Management Review.
Referee (2009-), European Journal of Finance.
Referee (2008-), Brazilian Review of Finance.
Referee (2008-), International Journal of Business and Economics.