Equity Reverse Convertible Model Portfolios

UBS presents model portfolios for reverse convertibles in USD, EUR, and CHF, designed to generate income from equity market volatility. The report utilizes a proprietary selection methodology to identify stocks with optimal risk-return trade-offs.

Key Takeaways

• 1.Reverse convertibles (RCs) are structured products used to generate yield and provide defensive equity exposure by 'buying on the dip'.
• 2.The report highlights model portfolios for USD, EUR, and CHF currencies using a proprietary CIO RC methodology favoring high implied volatility and low risk metrics.
• 3.Equity implied volatility remains elevated due to geopolitical tensions in the Middle East, offering a premium in single stock volatility over index volatility.

Table of Contents

• Introduction
• Portfolio construction
• Benefits of the CIO model portfolios
• US Dollar Model Portfolio
• Euro Model Portfolio
• Swiss Franc Model Portfolio
• Sector exposure
• Strike comparison
• Historical simulation
• Market & Volatility Snapshot
• CIO worst-of baskets
• Swiss Equities - Worst-of baskets
• European sectors - Worst-of baskets
• US sectors - Worst-of baskets
• What is a reverse convertible?
• Key features of investing in reverse convertibles
• Risks associated with reverse convertibles

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