UBS's Yield Enhancement Strategy ("YES") Returns - and then the Losses - Were Caused by Equity Market Exposure
UBS marketed YES as market-neutral based on a combination of four options is sometimes referred to as an "Iron Condor". UBS accounts subjected to YES treatment suffered losses of 12% to 14% in December 2018 when the S&P 500 dropped 9.2% because the overlay was more than 100%.
In this paper the authors we explain the option basics necessary to understand the YES strategy and illustrate how UBS actually implemented the strategy with predictably disastrous results. They also present how UBS described the strategy in its marketing materials. Research paper can be downloaded from our website.