How Long Will Low Volatility Last?

Posted on July 11, 2017 By Harbourfront Technologies

Will this low volatility persist and can a large market decline happen in this environment? Aaron Brown recently published an article in which he pointed out that a large jump in realized volatility happens only when the VIX is above 20. …the important thing is that there aren’t big surprises …

Read More

VIX Options: Should We Buy Them When Volatility is Low?

Posted on June 24, 2017 By Harbourfront Technologies

In the continuation of the “Low Volatility is Not a New Normal” theme, Adam Samson of Financial Times published another post based on the recent report by JPMorgam which suggested using VIX options for managing the risks. Risk assets, like stocks, have been rallying “for years”, sending market volatility near …

Read More

Low Volatility is Not a New Normal

Posted on June 17, 2017 By Harbourfront Technologies

Last week, JPMorgan issued a report on the state of quantitative investing and the current low volatility environment. The report pointed out that despite the political uncertainties (Comey testimony, UK elections, ECB, geopolitical uncertainty, Qatar etc.), the volatility remains subdued. In fact, in the last 20 years the VIX closed …

Read More

VSTOXX European Volatility Exchange Traded Products: EVIX and EXIV

Posted on June 7, 2017 By Harbourfront Technologies

With the popularity of Exchange Traded Funds on the rise and an exponential increase in short interests in the volatility ETFs, it’s just a question of time that ETF issuers will launch new instruments aiming at the volatility markets in other geographical locations. Indeed, last month, VelocityShares issued 2 new …

Read More

Low Volatility and The Danger of Increased Leverage

Posted on May 25, 2017 By Harbourfront Technologies

After a sharp move in the VIX a week ago, today the volatility index finished below 10 (9.99 to be exact). It looks like we are going into a low-volatility period again. Last week, just before the volatility spike, Mohamed A. El-Erian warned of the danger of investing in a …

Read More

What Caused the Increase in Volatility of Volatility?

Posted on May 23, 2017 By Harbourfront Technologies

Last Wednesday saw a huge increase, in percentage terms, of the volatility indices. The 1M spot VIX increased by 46%, while the underlying SPX index decreased by only -1.8%. As discussed in our previous post entitled Is Volatility of Volatility Increasing?, such a big percentage change in the VIX associated …

Read More

Is The Volatility Index VIX Too Low Compared to High-Yield Spreads?

Posted on May 21, 2017 By Harbourfront Technologies

In the previous post entitled Relationship Between Credit Default Swaps and Equity Options we discussed about the link between high yield spreads and equity volatility. We also provided an academic reference that formally proved their relationship. Basically, there is a high degree of correlation between the VIX and high yield …

Read More

How to Find Cheap Hedges

Posted on May 16, 2017 By Harbourfront Technologies

In the previous posts entitled Where are the Cheap Hedges for Equity Portfolios? Now Is The Time to Hedge, But The Cost of Insurance Can Be Expensive, we outlined some solutions for finding inexpensive hedges in this low volatility environment. In this post we will continue to explore some more …

Read More

“It might be that VIX is fairly priced for the first time, and that risk is fairly low”

Posted on May 14, 2017 By Harbourfront Technologies

Last week, the volatility index hovered around its lower range. However, the low volatility phenomenon is occurring not only in the equity space, but across the board, from fixed income, to currency, to commodity markets around the world.  Still, experts are divided whether this current low volatility is pricing in …

Read More

Risks Involved When Investing in Exchange Traded Funds

Posted on May 10, 2017 By Harbourfront Technologies

The asset under management (AUM) of the Exchange Traded Fund (ETF) industry has grown substantially in the recent years. From 2007 to the end of 2016, AUM increased from $851 billion to $3.546 trillion. Investors have been enjoying many benefits, especially the low cost, offered by ETFs as a result …

Read More