Joseph Amato: What has last week's correction taught us?

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...