亚太地区量化策略亚太股市防范进一步宏观风险的廉价对冲工具再度出现

1、Asia Pacific Quantitative & Derivatives Strategy12 August 2019Asia Pacific Equity Derivatives HighlightsCheap hedges against further macro risks flare-upWhile investors may be tempted to reduce hedges following a sharp correction at the beginning of the month, we think it is prudent to stay hedg

2、ed considering macro uncertainties such as the disconnect between rates and risky assets, persistent trade war risks and cyclical downside risks. In this note, we highlight a of cheap hedges against further macro risks flare-up, including exotic structures that take advantage of current elevated ske

3、w and equity-FX correlation as well as a systematic hedging strategy enhanced by sentiment and market risksignals.Global Quantitative and Derivatives StrategyTony SK Lee AC(852) 2800-8857tony.sk.leeJ.P. Morgan Securities (Asia Pacific) Limited/J.P. Morgan Broking (Haoshun Liu AC(852) 2800-7736haoshu

4、n.liu) Limited·Strategies that monetize rich downside skew: With downside skew trading at the high end of the historical range, we recommend hedging structures that take advantage of elevated skew, including knock-out puts and appearing put spreads. H-shares is currently the best underlying for

5、 such structure from both a skew extremeness and valuation cushion perspective.J.P. Morgan Securities (Asia Pacific) Limited/J.P. Morgan Broking (He Zhang AC(852) 2800-7897he.zhang) Limited·Buy puts contingent USDKRW capped at expiry: Due to the combination of elevated Equity / FX correlation,

6、increased FX volatility, a close-to-cycle-high USDKRW, potentially positive spillover to KRW if an oversold CNH stabilizes, we recommend buying H-shares puts contingent on USDKRW capped for significant cost savings compared to vanilla counterparts.J.P. Morgan Securi ies (Asia Pacific) Limited/J.P. M

7、organ Broking (Yukun Zhang AC(852) 2800-5148yukun.zhang) LimitedJ.P. Morgan Securities (Asia Pacific) Limited/J.P. Morgan Broking (Marko Kolanovic, PhD(1-212) 272-1438marko.kolanovicJ.P. Morgan Securities LLCDavide Silvestrini(44-20) 7134-4082davide.silvestriniJ.P. Morgan Securities plc) Limited

8、3;Systematic hedging strategy enhanced by sentiment and market risk signals: We propose an enhanced hedging strategy that rotate between put spread, put spread collars and put ratios based on signals from our China A-shares Sentiment Index and option implied skew. The enhanced hedging strategy shows

9、 superior long term performance compared to vanilla strategies for most major regional indices, especially for China underlyings such as H-shares, MSCI China and A-shares ETFs. The mcurrently recommends buying put spreads on theseunderlyings. In addition, we provide an update of performance of commo

10、n systematic protection strategies using 1M vanilla options.See page 21 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that thef

11、irm may have aof interest that could affect the objectivity of this report. Investors should consider this report as only a single factor inmaking their investment decision.获取报告1、2、3、每周群内7+报告；当日华尔街日报、学人4、行研报告均为公开利归原作者所有，起点财经仅分发做内部学习。扫一扫关注 回复：加入“起点财经”群Tony SK Lee (852) 2800-8857tony.sk.leeAsia Pacifi

12、c Quantitative & Derivatives Strategy12 August 2019Cheap Hedges against Further Macro Risks Flare-upWhile investors may be tempted to reduce hedges following a sharp correction at the beginning of the month, we think it is prudent to stay hedged considering macro uncertainties such as the discon

13、nect between rates and risky assets, persistent tradeKey research from JP Morgan macro strategists“The J.P. Morgan View: How much cyclical risk to hold when US policy is breaking bad”, August 9, 2019war risks and cyclical downside risks. In this note, we highlight aof cheaphedges against further mac

14、ro risks flare-up, including exotic structures that takeadvantage of current elevated skew and equity FX correlation as well as a systematic hedging strategy enhanced by sentiment and market risk signals.“Global Asslocation: Addmodestly to equities but with hedges”, August 8, 2019.Strategies that mo

15、netize rich downside skewAs a result of the latest trade risk escalation, short dated volatility across major global and Asian indices materially increased, and skew has significantly richened to the high end of the past 2yr history. In particular, downside skew in the 6M bucket is most elevated on

16、H-shares in terms of ranking over past 2 year history (Figure 1). On the other hand, downside risks are now less acute for H-shares considering the valuation cushion (Figure 2). For example, H-shares 1yr forward PE ratio is less than 20% from 1%tile levels in the past 10 years. In this environment,

17、we recommend investors consider hedging structures which exploit the skew richness, such as knock-out puts and appearing put spreads.“Tariff war into Phase 3: Economic impact, CNY and equity strategy implications”, August 2, 2019Figure 1: Major Global and Asian indices skew historical rankingFigure

18、2: H-shares 1yr forward PE history versus 80% strike15HSCEI 1yr fwd PE10yr 1%tile80% strike141312111098765Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg. *Table sorted by 6M 80% - 90% skew historical percentile ranking.Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg.For exampl

19、e, investors can consider buying H-shares Dec19 95% puts whicocksout at 80% or Dec19 95%-88% put spread with the lower strike put knocks in at 80% (barriers are monitored continuously).·HSCEI 30Dec19 95% puts that knocks out at 80% (continuously monitored): offer 0.93%, 63% discount compared to

20、 vanilla 95% putsHSCEI 30Dec19 95%-88% put spreads with the lower strike put knocks in at 80% (continuously monitored): offer 1.57%, 9% more expensive than vanilla 95% - 88% put spreads·290% - 110% skew2yr %tile80% - 90% skew2yr %tile3M6M3M6M3M6M3M6MHSCEI4.9%HSI6.0%NKY7.4%AS516.2%NDX10.4%UKX7.4

21、%KOSPI25.8%TWSE4.9%SPX11.5%SX5E8.9%3.7%86%91%86%42%89%78%93%5.7%5.4%5.8%3.7%93%80%86%4.1%82%68%3.6%5.0%85%4.1%42%48%38%35%10%24%14%21%22%11%8%10%3%6%0%2%4.8%10%6.4%4.2%7.6%76%4.6%5.5%3.8%6.3%92%4.1%3.5%78%38%4.9%35%43%5.1%3.4%3.7%3.5%9.5%93%85%87%5.0%5.0%3.9%6.9%89%4.1%Tony SK Lee (852) 2800-8857ton

22、y.sk.leeAsia Pacific Quantitative & Derivatives Strategy12 August 2019For the knock-out put, payoff at expiry will be the same as a vanilla 95% put provided that the barrier is not breached from now until options expiry. If the barrier condition is triggered, the put option would cease to exist,

23、 leaving investors unprotected in a falling market. Due to this design, cost of buying knock-out put is usually significantly cheaper than the vanilla equivalent. Here, we recommend to set the knock-out barrier at 80% of the initial spot, as the 80% barrier roughly corresponds to 1%tile valuation in

24、 the past 10 years, we think the likelihood of it being breached before end of year is small.For the 95%-88% appearing put spread, investors pay a slightly higher premium than the vanilla 95%-88% put spread to exchange for the potential that the payoff of the structure would be the same as a vanilla

25、 95% put if the knock-in event on the lower strike put is not triggered. Currently the premium of appearing put spreads versus vanilla put spreads is tight thanks to elevated skews. In the event that the knock-in condition gets triggered, the appearing put spread would function like a vanilla 95%- 8

26、8% put spread.Buy puts contingent on capped USDKRWAmid the recent trade re-escalation, Asian currencies posted significant weakening versus the dollar as regional equities decline. For example, our FX strategists highlight USDKRW is now close to previous cyclical highs. And with some softening in th

27、e trade spat with Japan, upside potential of USDKRW is relatively limited from these levels (JPM USDKRW Dec19 forecast 1225 vs spot 1216).Furthermore, a potentially stabilizing CNH should positively support KRW. Ourglobal strategist thinks thecurrency is now oversold from a positioningperspective, s

28、uggesting selling pressure in CNH could be alleviated in the short run.Figure 3: HSCEI, USDKRW and USDCNH 6M ATM volatility historyFigure 4: 6M correlation of HSCEI / USDKRW and HSCEI / USDCNHHSCEI 6M ATMF volatility35%14%0.2HSCEI Index / USDKRW CurncyHSCEI Index / USDCNH CurncyUSDKRW 6M ATM volatil

29、ity (RHS)USDCNH 6M ATM volatility (RHS)33%12%0.031%10%29%-0.227%8%25%-0.46%23%-0.621%4%19%-0.82%17%15%0%-1.0Feb-15Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg.Sou

30、rce: J.P. Morgan Equity Derivatives Strategy, Bloomberg.Investors who agree with the above view can consider buying HSCEI puts contingent on USDKRW capped at expiry for significant cost savings. The structure is attractively priced due to strong negative implied Equity/FX correlation and increased F

31、X volatility. Relatively speaking, pricing of the same structure but contingent on USDCNH capped is less attractive due to less favorable implied Equity/FX correlation, lower USDCNH implied volatility and higher hedging cost. Nevertheless, the indicative cost of buying HSCEI puts contingent on USDCN

32、H capped is also included for comparison purpose.3Tony SK Lee (852) 2800-8857tony.sk.leeAsia Pacific Quantitative & Derivatives Strategy12 August 2019·HSCEI 30Dec19 95% contingent on USDKRW below 1,230 at expiry: offer 1.11% (USDKRW reference level 1,216, 55% cost savings vs vanilla 95% put

33、s). HSCEI 30Dec19 95% contingent on USDCNH below 7.15 at expiry: offer 1.35% (USDCNH reference level 7.10, 45% cost savings vs vanilla 95% puts).·Figure 5: USDKRW and USDCNH price historyFigure 6: Position proxy for USD/CNH futures traded in7.21300USDCNHUSDKRW (RHS)7.012506.812006.611506.411006

34、.210506.01000Feb-15Aug-15 Feb-16 Aug-16 Feb-17Aug-17 Feb-18 Aug-18 Feb-19Aug-19Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg.Source: J.P. Morgan Market Strategy, Bloomberg.Systematic hedging strategy enhanced by sentiment and market risk signalsWhile most investors agree hedging instrum

35、ents can be optimized based on macro and volatility environment, it remains a challenge to systematically identify the most efficient hedging strategy in different market regimes. We explore signals to help with such hedging selection decisions. Specifically, our analysis shows a hedging rotation st

36、rategy based on our proprietary China A-share Sentiment Index and equity skew would have significantly enhanced performance historically for major Asian indices.Figure 7: Annual average performance of various hedging strategiesFigure 8: CSI 300 vs. China A-shares Sentiment Index signalsChina A-share

37、 Sentiment Index singals "Overheating"4200China A-share Sentiment Index turned "Bearish"40003800Launch of China A- share Sentiment Index (in "Bearish" territory)3600China A-share Sentiment Index off from "Overheating"34003200China A-share Sentiment Index turne

38、d "Bullish"30002800Nov-18Dec-18 Jan-19Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg.Source: J.P. Morgan Equity Derivatives Strategy, Bloomberg.Recall that the China A-share Sentiment Index is an aggregate Sentiment measure based

39、on Flow, Investor Confidence, Derivatives Positioning and Techinicals. The index has been effective in identifying market regimes and turning points for China equities historically (see here). For example, we see China stocks tend to have larger downside risks and relatively limited upside gains in

40、“Bearish”, “Overheating" and “Contrarian Bullish” regimes (or “Non-bullish” regimes), and much lower downside495% - 90% - 105% 95% - 90% put 95% - 90%Sentiment & Skew put spread collarspreads1x2 put ratiosinformed strategyHSCEI Since Jul-070.5%0.0%1.8%4.7%Since Jan-130.1%0.1%1.0%1.2%HSISinc

41、e Jul-07-0.6%-0.8%2.2%2.2%Since Jan-13-2.4%-0.9%0.1%-0.6%MXCN Since Jul-070.2%0.2%1.7%4.0%Since Jan-13-1.6%0.0%0.6%0.7%2823 HK Since Jul-071.2%-0.9%1.6%4.1%Since Jan-13-1.8%-0.5%-0.6%1.7%NKYSince Jul-070.9%-1.3%2.9%2.7%Since Jan-13-0.8%-1.6%1.3%1.4%KOSPI2 Since Jul-070.1%-1.6%-0.3%1.0%Since Jan-13-0

42、.7%-1.2%-0.9%-0.9%Tony SK Lee (852) 2800-8857tony.sk.leeAsia Pacific Quantitative & Derivatives Strategy12 August 2019risks with more upside potential in “Bullish” environment. We think investors should consider hedging strategies that forego some upside potential in a Non-bullish environment, s

43、uch as put spread collars, and strategies that sell more downside in a Bullish environment, such as put ratios.Other than macro environment, derivatives pricing is also an important consideration for option hedging selection. For example, when skew is elevated, strategies that sells OTM puts are mor

44、e attractive, while the ones selling OTM calls tend to offer poorer risk reward. As such, we think investors who systematically hedges via put spread collar overlays should consider switching to put spreads when skew is relatively elevated compared to history.Combine the above together, we recommend

45、 the below regime-based rotation strategy using our China A-share Sentiment and skew signals. The Sentiment signal is applied with a one week lag to allow enough time for trade implementation. Skew is based on the underlying index 1M 90% - 110% skew historical z-score.·Non-bullish environment,

46、extreme skew (2yr z-score > 2): downside risk is significant but risk reward for selling calls is not attractive, investors should buy 95% - 90% put spreadsNon-bullish environment, normal skew (2yr z-score <= 2): downside risk is significant and upside potential is limited, investors should bu

47、y 95% - 90% - 105% put spread collarsBullish environment: downside risk is not pronounced, investors can forego more downside potential to lighten premium and buy 95% - 90% 1x2 put ratios··Figure 9 to Figure 14 show the backtest performance of the Sentiment and Skew Based Rotation Strategy

48、 and underlying vanilla strategies since Jul-07 on major Asian underlyings. Below we summarize our key observations.i.Our backtest analysis shows that the rotation mexhibit strong andpositive long-term performance on all the Asian underlyings in ouruniverse. The performance remains attractive in the

49、 relatively low volatility regime since 2013 (Figure 7).The superior performance is more pronounced on China underlyings such as H- shares, MSCI China and FTSE China A50 tracker. Since Jul-07, the Sentiment and Skew Based Rotation Strategy would have generated more than +4.0% annual gains for these

50、China underlyings, more than double that of the second best strategy 95%/90% 1x2 put ratios.For other regional indices such as Hang Seng, Nikkei 225 and KOSPI 200, the Sentiment and Skew Based Rotation Strategy would have delivered long-term performance that is more attractive than put spreads and p

51、ut spread collars, and similar to systematically long put ratios. The effectiveness of China Sentiment signals for other regional indices is in line with the fact that China has become a main regional performance and risk driver in recent years.Looking at the largest 5 sell-off episodes in the past

52、10 years, we find the Sentiment and Skew Based Rotation strategy on average generate more hedging gains compared to both systematic long put spreads and put ratios, albeit slightly less hedging gains compared to put spread collars (Table 1).ii.iii.iv.Overall, our analysis shows a hedging rotation st

53、rategy based on macro environment and derivatives pricing attractive can offer lighter carry cost (in many cases positive performance) than the vanilla hedging strategies highlighted for regional indices, while providing attractive hedging efficiency. We recommend investors to adopt asimilar signal

54、based hedging strategy. Currently, our msuggests put spread is5Tony SK Lee (852) 2800-8857tony.sk.leeAsia Pacific Quantitative & Derivatives Strategy12 August 2019the most suitable hedging strategy on China underlyings given Bearish sentiment and elevated skew. Please find below indicative cost

55、of Sep19 expiry 95% - 90% put spreads.···HSCEI 27Sep19 95% 90% put spreads: offer 0.64%, delta -14%MXCN 27Sep19 95% 90% put spreads: offer 0.84%, delta -14%2823 HK 27Sep19 95% 90% put spreads: offer 0.82%, delta -14%Table 1: Performance of the systematic hedging strategies when major Asian indices experienced their respective 5 largest non-overlapping sell-offs in 3 months since 2009Source: J.P. Morgan Equity Derivatives Strategy, Bloo