24/09/18

Understanding The Volatility Storm To Come, Part 2: Volatility Reflexivity And Liquidity



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Understanding The Volatility Storm To Come, Part 2: Volatility Reflexivity And Liquidity
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Authored by Christopher Cole via Artemis Capital Management,

Read Part 1: Fragility In The Market's Medium, here...

"The post-modern volatility regime poses the question whether VIX ETNs and futures are large enough to influence the much deeper SPX options market. The existence of this dynamic would represent a self-reinforcing feedback loop with potentially dangerous repercussions." -Artemis, "Volatility at Worlds End" March 2012 

"The wrong 'risk-off' event may expose a hidden liquidity gap in the short VIX complex that could unleash a monster." - Artemis, "Volatility and Allegory of Prisoners Dilemma" October 2015 

" The Global Short Volatility trade now represents an estimated $2+ trillion in financial engineering strategies that simultaneously exert influence over, and are influenced by, stock market volatility... Like a snake blind to the fact it is devouring its own body, the same factors that appear stabilizing can reverse into chaos." - Artemis, "Volatility and the Alchemy of Risk, October 2017

Reflexivity in volatility has been a core focus of Artemis research for nearly a decade. The ....

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