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Volatility trading within the limits of arbitrage? 26 Aug 2013 | 05:27 pm
Some market inefficiencies are not easily exploitable. Sometimes, large inefficiencies become popular enough that the activity of arbitrageurs makes them into small inefficiencies. And sometimes small...
The Good News About Correlation 19 Aug 2013 | 08:46 am
High implied correlation is a like an ongoing murmur of doubt about the ability of individual equities to trade on their own fundamentals. In “Two Themes to Watch in 2013” and “Three Reasons Equity Ca...
A Long Term Look at the S&P 500 Volatility Risk Premium 12 Aug 2013 | 07:21 pm
Some clients here and readers on Twitter asked for a long-term look at the relationship between the historical volatility of the S&P 500 and the implied volatility of SPX options. The chart below sho...
Australian Risk Premiums: Slower China, Faster Dollar 5 Aug 2013 | 08:12 am
When talk turns to slower growth in China, one of the most popular topics has been when and to what extent less demand for commodities would start to catch up to Australia, and when the Reserve Bank o...
Do the Commitments of VIX Futures Traders Predict the Future? 22 Jul 2013 | 04:29 pm
Not really. Here are the 2013 weekly non-commercial VIX futures Commitments of Traders (COT) from the CFTC: There are interesting stories in the time series – especially the large run-up in net short...
The Post-Crisis Data Point 15 Jul 2013 | 09:50 am
After the financial crisis, there were fewer asset classes that people were willing to describe as diversifiers. They were/are: “managed futures,” which generally just means long/short commodity tren...
Volatility as an Accidental Asset 8 Jul 2013 | 06:49 pm
BlackRock is receiving some attention today for two recently published reports, both of which focus on the idea of volatility as a distinct asset class. This is already a well-explored idea: to give j...
Stressed term structures in bonds, stocks, and real estate 21 Jun 2013 | 05:44 pm
It’s absolutely nuts that implied volatility has exploded higher on such a small decline from recent highs. In the attached video, I explain this week’s selloff by looking at term structure changes in...
Mark Blyth at Google on Why Austerity Is So Dangerous 11 Jun 2013 | 11:34 pm
In this talk, Mark Blyth (Brown) works through some of the material in his newest book, and the whole thing is really enjoyable. He’s casual and funny and manages to cover some great topics, including...
What the S&P 500 term structure said 10 Jun 2013 | 06:28 pm
In equity markets, a selloff doesn’t really count until it gets the term structure up. For instance, here’s the ratio of SPY 3 month implied volatility to one year implied volatility since 2012: The...
