Deutsche Börse has added three risk trigger indices to its Daxplus strategy index family.

Deutsche Börse has added three risk trigger indices to its Daxplus strategy index family.

Risk Trigger Germany, Risk Trigger Bric and Risk Trigger Russia serve risk-averse investors as an early-warning system in the event of falling prices on the related markets, triggering a reallocation of their investments.

The new index concept is based on the premise that share price increases generally happen slowly and steadily, i.e. with low volatility, whereas decreases mostly happen very quickly, displaying a much higher volatility. High volatility is equated to a high level of risk. If the Dax, Daxglobal Bric and Daxglobal Russia indices underlying the risk trigger indices exceed a certain defined threshold, the investment is reallocated in its entirety to the money market.

If markets begin to rise again, this is shown by the risk trigger indices, with reinvestment in the equity portfolio only taking place when the volatility level has fallen below a defined lower limit and the market phase is no longer deemed to be risky. The short-term ten-day volatility level of the underlying index forms the basis of this decision.

The risk trigger indices offer risk-averse investors, in particular, the opportunity to participate in the performance of an equity portfolio but limit their losses in bear markets by getting out in time when volatility is critical. In the meantime, the equity investment is exchanged for a risk-free money market investment with a low but guaranteed return. Reinvestment is possible again when the volatility in the markets is less high.