The volatility of the VIX Index has at times caused the impression that it is less than reliable as an indicator of risk. VIX futures and the volatility surface provide clearer information about the market perception of risk and should be used in conjunction with the VIX Index. The different movements of the VIX Index, VIX futures and of the volatility surface historically fall into four major categories that can be useful in understanding the level and length of equity market risk perceived in the options market.
Read More
Every crisis is an opportunity to learn and grow. Although history does not necessarily repeat itself, risk management flaws and weaknesses often do. To avoid making the same mistakes again, it is useful to reflect on lessons learned and in many cases re-learned.
To that end, we have conducted a survey of a select group of risk management professionals to tease out their reactions and conclusions to the events of 2020.
Read More
Liquidity risk is a key risk and has been a recent focal point for regulators, with increasing transparency and attention demanded by SEC Rule 22e-4 for mutual funds and by Basel III's liquidity requirements for banks. Meanwhile, market participants have a sense that asset liquidity may be deteriorating, but there is little agreement even on the definition of liquidity risk or on how exactly to measure it. It is clear, however, that asset liquidity risk is multifaceted and managing it is both an art and a science.
We explore some of the questions surrounding asset liquidity risk in our whitepaper.
Read More