The S&P 500® Risk Control 10% Indices offer investors greater stability and a reduction in the overall risk level of the S&P 500, widely regarded as the best single gauge of the U.S. equities market. By integrating a volatility control within the index rules, Standard & Poor’s provides a new level of innovation for investors looking to gain exposure to the U.S. equity markets while limiting their risk. Currently, S&P Indices offers four risk controlled versions of the S&P 500.
The S&P 500 Risk Control Indices utilize the existing S&P 500 methodology, plus an overlying mathematical algorithm designed to control the level of risk of the index by establishing a specific volatility target and dynamically adjusting the exposure to the S&P 500 based on its observed historic volatility.
S&P 500 Risk Control Indices include:
S&P 500 Risk Control 10% Index
S&P 500 Daily Risk Control 5% Index
S&P 500 Daily Risk Control 15% Index
S&P 500 Monthly Risk Control 12% Index
Index Name
Index Version
Risk Control Level
Maximum Leverage
Interest Rate
Volatility Calculation
Decay Factor Short-Term Volatility
Decay Factor Long-Term Volatility
Rebalance Frequency
S&P 500 Daily Risk Control 5% Index
The S&P 500 Daily Risk Control 5% Index represents a portfolio consisting of the S&P 500 Index and a cash component accruing interest based on LIBOR. The index is dynamically adjusted to target a 5% level of volatility. Volatility is calculated as a function of historical returns that uses exponential weightings to give more significance to recent observations. In addition, a short and long term measure of volatility are used to cause the index to deleverage quickly, but increase exposure more gradually on a relative basis. The index rebalances daily.
Total Return
5%
150%
LIBOR
Exponentially weighted
94%
97%
Daily
S&P 500 Daily Risk Control 10% Index
The S&P 500 Risk Control 10% Index represents a portfolio consisting of the S&P 500 Index and a cash component accruing interest based on LIBOR. The index is dynamically adjusted to target a 10% level of volatility. Volatility is calculated as a function of historical returns that uses exponential weightings to give more significance to recent observations. In addition, a short and long term measure of volatility are used to cause the index to deleverage quickly, but increase exposure more gradually on a relative basis. The index rebalances daily.GICS® Map Effective August 29, 2008.
Total Return
10%
150%
Overnight LIBOR
Exponentially weighted
94%
97%
Daily
S&P 500 Monthly Risk Control 12% Index
The S&P 500 Monthly Risk Control 12% Index represents a portfolio consisting of the S&P 500 Index and a cash component accruing interest based on the Federal Funds Rate. The index is dynamically adjusted to target a 12% level of volatility. Volatility is calculated as a function of historical returns based on a simple daily moving average. In addition, a short and long term measure of volatility are used to cause the index to deleverage quickly, but increase exposure more gradually on a relative basis. The index rebalances monthly.
Total Return
12%
150%
Federal Funds
Maximun (20 day, 100 day) Moving Avg.
20 days
100 days
Monthly aligned with option expiry (3rd Friday each month)
S&P 500 Daily Risk Control 15% Index
The S&P 500 Daily Risk Control 15% Index represents a portfolio consisting of the S&P 500 Index and a cash component accruing interest based on LIBOR. The index is dynamically adjusted to target a 15% level of volatility. Volatility is calculated as a function of historical returns that uses exponential weightings to give more significance to recent observations. In addition, a short and long term measure of volatility are used to cause the index to deleverage quickly, but increase exposure more gradually on a relative basis. The index rebalances daily
Total Return
15%
150%
LIBOR
Exponentially weighted
94%
97%
Daily
Index Governance and Policy
This index is maintained by the S&P Index Committee, whose members include Standard & Poor’s economists and index analysts. It follows a set of published rules and policies that provide the transparent methodology used to maintain the index.
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