We can now add yet another entry to the long list of overly complex financial products that have been designed, built and levered before blowing up in investors' faces, writes Joseph Amato, president and chief investment officer for equities at Neuberger Berman
For two years, equity markets kept going up and the best-known measure of implied market volatility - the CBOE Volatility Index, or VIX - seemed trapped, incredibly, below 10. Inevitably, structured products were developed to sell VIX futures and pick up the premium from being 'short volatility'. Equally inevitably, the fact the VIX was so low and the premium so tight led to more and more leverage being applied. These products were so far over their skis that a modest sell-off in equity markets was enough to push the VIX to levels that sent them crashing down the slopes. Product pr...
To continue reading this article...
Join Professional Adviser for free
Signup and gain exclusive members-only insights
- Unlimited access to real-time news, industry insights and market intelligence
- Stay ahead of the curve with spotlights on emerging trends and technologies
- Receive breaking news stories straight to your inbox in the daily newsletters
- Make smart business decisions with the latest developments in regulation, investing retirement and protection
- Members-only access to the editor’s weekly Friday commentary
- Be the first to hear about our events and awards programmes
