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Is Negative Convexity Risk ‘Flashing Red’?
This week's trade-related turmoil served to bring a familiar set of risks back to the fore.
Last year, market participants got a crash course (figuratively and literally) in many of the dynamics that the likes of JPMorgan's Marko Kolanovic have been warning about for years. From the February 2018 VIX ETN extinction event to bouts of apparent CTA deleveraging to the "accelerant" effect of dealer hedging to the perils of low liquidity, investors learned the hard way that modern markets aren't a
“market depth declines exponentially with the VIX” Shouldn’t that be “inversely”?
it’ a reflexive relationship
Well, that’s an obfuscatory reply. I guess that means yes.