Dynamic Hedging

This office is purposefully located in the heart of the financial district which is home to the world’s largest futures and options exchanges. Interaction with the top executing brokers and the exchanges themselves help ensure that Nexus’ clients will benefit from the latest innovations in new products offered by the exchanges. In turn, the relationships are close enough to allow Nexus to provide insightful advice to the exchanges on what the needs are of mutual funds, pension plans and insurers. This helps keep a dialogue open to ensure the development of suitable new hedging instruments.

Nexus offers

  • Monitoring and management of rules based strategies for structured products and retirement solutions using exchange traded futures and options to maximize liquidity and price discovery.
  • Monitoring and management of Variable and Indexed Annuity Liability hedges using exchange traded futures and options to maximize liquidity and price discovery. Strategies include static hedges of Index Liabilities using FLEX options as well as semi-dynamic replication; using Variance Futures, with all their intricacies, as better alternatives to using OTC Variance swaps for VA hedging; using VIX futures across multiple tenors, to hedge residual Vega risks associated with dynamic hedge.

Trading on exchanges means there is no room for error. Traditional OTC trading can allow for mistakes in orders to be corrected and negotiated after the fact. In an exchange environment, every verbal order, every trade, is final and very real. Having access to the resources that are accustomed to this level of commitment and high speed action is essential for any firm that wants the price advantages, liquidity and decreased counter-party risk that is associated with trading on exchanges. Nexus’ Chicago location provides access to the largest pool of talent that is familiar with all the risks and protocol of using exchange traded instruments.

The Nexus Chicago team is currently comprised of former seat members of the following exchanges: The Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), The Chicago Stock Exchange (CHX) and the Chicago Board Options Exchange (CBOE). The team has traded Eurodollar Futures and Options, S&P500 Futures, FX Futures, VIX Futures, VIX options, SPX, NDX, RUT, DJX Options and other commodity and equity futures and options. The team also includes people who have traded Futures, Options and Equities in foreign markets including Canada, Europe and the Pacific. The team also includes software people who have written automated trading engines for executing stock and options orders electronically. This combination of experience, in addition to the software and expertise that the parent actuarial firm has, enables Nexus to offer turnkey solutions to the asset management world that will be regulation friendly at a time when many firms are burdened by all the new constraints that European and US regulators are imposing.

Nexus Chicago will help any client open the CFTC and SEC regulated accounts necessary for using exchange instruments, will help negotiate clearing and brokerage fees commensurate with other market participants, and will manage all the day to day operations associated with trading “live” exchange instruments including order entry, order management, portfolio management, trade checking, margin maintenance, position limit reporting, collateral selection and sweep cash management.

For complex and large orders, the Nexus team prefers to use “Agency Only” brokerage firms that have access to all the bank desks, multiple hedge funds, and multiple proprietary trading firms. This practice is followed in order to minimize the market impact of orders, and to source liquidity traditionally unavailable in the OTC world. By maximizing the audience for an order, the greatest amount of price discovery is achieved.

For more information contact:

Charles Gilbert, President

Todd Doersch, President and Managing Director, Chicago

Nexus Dynamic Hedging

For more information, please contact us at charles.gilbert@nexusrisk.com Or todd.doersch@nexusrisk.com

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