The bank’s structuring team discusses its first high volatility index strategy and second-generation evolution.

The US bank has gathered US$328m in sales from structured notes tracking the S&P Edge Volatility Index Series, its first high volatility strategy that went live in May 2024, SRP data shows.

Meanwhile, one of the indices has been traded with US$10.2m in notional in the registered index-linked annuity (Rila) market through Midland National Life Insurance Co.

“That was a good showcase of how one methodology went from structure notes into the insurance space naturally,” said Thomas Rhee (pictured), assistant vice president, multi-asset group (MAG) at Citi.

As volatility control overlay becomes a standard set by precedence in the market, Citi collaborated with S&P Dow Jones Indices (S&P DJI) for the S&P Edge Volatility Index Series, its first high volatility strategy designed for structured products, according to Rhee.

“S&P DJI’s brand, infrastructure, and global support on the entire series allowed for timely and effective pushes to a widespread client base since last year,” he said.

The strategy measures the performance of leveraged dynamic weighting strategies applied to either the S&P 500 or S&P 500 Futures Index based on a forward-looking estimate of volatility. It comprises of six indices with a volatility target level of 35% or 40% on top of an optional decrement level of one percent or six percent.

“Volatility controlled indices have generally struggled a lot this year, especially following Liberation Day when there was a very high decorrelation with benchmarks,” said Rhee. 

When the volatility spiked, the indices deleveraged and lagged benchmarks in the subsequent market recovery.

However, a steady and robust rebound in the US equity market afterwards has taken most of such indices back to the green territory, the senior structurer added.

“The relatively stable pricing and higher yields compared to traditional benchmark indices explains the uptick in volumes on these indices,” said Rhee. “Higher volatity target and higher decrement level generally lead to a higher coupon. It’s ultimately a balance between pricing efficiency from [the overlays] and getting the autocall payout.”

Last August, Citi and S&P DJI started to roll out the “second generation” high volatility strategy with the S&P Intraday Edge Indices, which adopts intraday rebalancing instead of daily rebalancing.

As part of the index family, S&P 500 Futures Intraday Edge Volatility Indices, specifically the ones targeting a volatility of 35% or 40%, are currently in the US structured notes market, primarily catering to independent broker-dealers and registered investment advisors (RIAs) through calendar offerings.

“The S&P Intraday Edge series with trend and overnight features have outperformed other volatility-controlled indices and weathered ‘Liberation Day’,” said Rhee.

“I think there’s likely to be a slowdown [in sales] going into the year end, but it’s been a healthy year,” he said, referring to the US structured notes market.

More recently, Citi has been pitching the offering with a twist for multi-asset exposure through the S&P Multi-Asset Intraday Edge Macro Indices that comes with a low volatility target of five percent.

“This index family was a direct response to demand for a multi-asset positioning amidst equity concerns, resonating with clients globally,” said Shan Zhong, vice president at Citi’s multi-asset group.

*The S&P Edge Volatility Index Series received the Deal of the Year award at the SRP Americas Conference 2025.

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