Shailesh Gupta, Head of Structural Alpha, Simplify Asset Management

Of all the concepts focused on throughout the discussions hosted on the Alpha Exchange, the notion of “carry” is one of my favorites. In its most basic definition, carry measures the income or cost to holding an asset in the steady state, when nothing changes. Underpinning the assessment of value in any option trade or strategy is a view on the favorability of carry at a given point in time. Can I own options for free or at least at meaningful discounts to their value? Mr. Market makes this very unlikely. Can I be especially well compensated for being short optionality? These are challenging questions, worthy of careful study. And in this context, it was a pleasure to welcome Shailesh Gupta, the Head of Structural Alpha at Simplify Asset Management to the podcast. Our conversation explores areas of carry in the market, why they exist, how they can be harvested and what can go wrong in the process. Shailesh shares his views on the pricing of interest rate volatility, where the vol risk premium has been especially high and how that fits into product design at his firm’s ETF platform. We talk also about risk – including the crowding episode in VIX products in 2017 leading into the XIV event of 2018. I hope you enjoy this episode of the Alpha Exchange, my conversation with Shailesh Gupta.

Om Podcasten

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.