Some lessons stay with you, even when the asset class doesn't.
During my time at the ZHAW School of Management and Law, I wrote my undergraduate thesis on volatility arbitrage. The focus was on designing and evaluating algorithm-based strategies that utilize futures contracts to capture risk premia when implied volatility diverges from realized volatility.
The strategies centered on selling volatility when the market priced in more fear than subsequent outcomes justified. This involved creating entry and exit rules, applying risk filters, and simulating outcomes across different volatility regimes. The goal wasn’t directional speculation, but the systematic exploitation of fear-based mispricing, particularly in stressed markets, where volatility tends to be overpriced. With the right structure and discipline, that mispricing could be turned into a repeatable edge.
That principle has stayed with me.
From Quant Strategy to Deal Discipline
Today, at Paligan, I don’t operate in liquid markets. I work with founders, structure private deals, and invest in early-stage companies. However, the mindset I developed through researching volatility arbitrage still informs my approach to risk and return.
Volatility arbitrage taught me a few key things:
Mispricing isn’t rare. It happens whenever fear dominates facts.
Asymmetry matters. If the upside is capped, the downside must be boxed in. You need structure.
You don’t win by reacting. You win by defining your system, sticking to your logic, and clearly underwriting risk.
These lessons translate surprisingly well into private markets. At Paligan, we back deals with asymmetric profiles. We often pass on hype-driven rounds and instead look for opportunities where we understand the downside first. Whether it's a convertible loan, a private credit deal, or an equity round, the constant is conviction shaped by clarity.
Structure Over Forecast
One of the key findings from researching volatility trading was that a signal without a process is just noise. You could be directionally right and still lose money if the structure is wrong. That’s equally true in private investing.
We don’t forecast which company will become a unicorn. We underwrite the capital structure, the entry terms, and the conversion mechanics. We don’t predict the future, we structure the present.
In this sense, the difference between volatility arbitrage and venture capital lies in application, not philosophy.
