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 …

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 …

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 …

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 …

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 …

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 …

Last week, professor and Nobel Laureate Robert Shiller came out with a statement regarding the market high valuation. He referred to the CAPE ratio which is at 29 at the moment and is considered high.  However, he also said that the high CAPE ratio does not necessarily mean investors should …

Last week, after the French election, the VIX plummeted and started its journey into the low-volatility regime again. Consequently,  volatility selling strategy began gaining traction.  However, FT.com published a warning Jim Keohane, the chief executive of the Healthcare of Ontario Pension Plan, compares selling volatility to picking up dimes in …

More and more investors are using the power of computing technologies and quantitative techniques to manage their portfolios these days. They believe that quantitative trading can help reduce the PnL volatility resulted from emotional decision making and thus increase the consistency of returns. However, sometimes the machine beats the man, …

Two weeks ago, in a post entitled To Hedge or Not to Hedge, we argued that it’s always important for corporations to hedge the commodity prices and not to speculate. This post continues with more examples that highlight the importance of economic hedging. As oil price fluctuates, airlines can see …