Launched in 2008, our EURO STOXX® 50 Index Dividend Futures have quickly established themselves as a benchmark and have successfully captured most of the dividend swaps market in Europe. Since then, we have expanded our portfolio to other indexes and also single stocks.
Here are 10 reasons why equity index traders and investors should consider dividend derivatives.
1. Dividends have a low correlation with traditional asset classes such as equities and bonds and have developed over time into an asset class in its own right.
2. Dividends are less volatile than equities. Companies are often reluctant to cut dividends, even in a bad year.
3. Dividends tend to rise with inflation and can work as a hedge against inflation.
4. Unlike most equity and index derivatives, dividend futures and options only have an annual expiry with terms of up to 10 years.
5. Dividend derivatives have had an impressive growth rate over the past five years. Over 40,000 contracts change hands on a daily basis and open interest has grown to over 3 million contracts.
6. Eurex Exchange is by far the largest and most liquid market for dividend derivatives world-wide.
7. Single Stock Dividend Futures are available for all components of the EURO STOXX® 50 Index, as well as the largest Swiss and U.K. stocks.
8. In September 2013, we introduced a new attractive pricing for Single Stock Dividend Futures, based on the level of dividends.
9. The main difference between dividend swaps and dividend futures is the mitigation of counterparty risk for the exchange-traded futures contract via Eurex Clearing.
10. OTC trades in dividend futures and options can be cleared at Eurex Clearing, helping you to potentially reduce your margin requirements through cross margining.
Also follow us on Twitter @EurexGroup and LinkedIn for our latest dividend product news.
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