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Volatility Ain’t What It Used to Be

Derivatives markets have never been this volatile. Over the past week, a leading high-yield credit default swap index that is a barometer of insolvency risk repeatedly reached new highs. On March 16, Cboe Volatility Index futures, which react to stock market volatility, soared to historic levels. Commodity prices are behaving similarly, with oil futures plummeting 34% on March 9 only to jump by a record 24% some 10 days later. Gold—usually a bulwark against equity market volatility—has been falling in tandem with stocks. Other financial measures have shown similar volatility as markets seesaw.

Yet…

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