I liked the "fear squared" bit. It's actually a derivative of a derivative of a derivative. On which you'll probably be able to buy derivatives....MOREFrom Ambrose Evans-Pritchard at the Telegraph:
A storm alert today from Simon Derrick at the Bank of New York Mellon. He cites three warnings from leading central bankers, all alarmed by the remarkable disregard for risk in the equity, credit, and currency markets.The CBOE White Paper announcing the introduction of the VIX of the VIX was:
The Bank of England’s Deputy Governor Charles Bean says the lack of volatility is "eerily reminiscent" of the run up to the financial crisis in 2007-2008. Investors are turning a blind eye to a large fact: that central banks are intent on extricating themselves from QE and emergency policies come what may, and this is going to be a painful experience.
Italy central bank Governor Ignazio Visco issued a similar warning on Friday: "Volatility on the financial markets in the advanced economies has subsided to well below the historic norm, reaching levels that in the past sometimes preceded rapid changes in the orientation of investors."
In America, Dallas Fed chief Richard Fisher has been warning for several weeks that the decline in the VIX index measuring volatility is an accident waiting to happen. One almost has the impression that he is itching to inflict some “two-risk way” into markets to shatter this complacency.
Mr Derrick says dash for yield is all too like the last stage of the carry trade just before Russia and East Asia blew up in 1998, and again in the summer of 2007 when investors seemed to lose all fear. Both episodes ended with a bang, at first signalled by a surge in the Japanese yen.
Today's warnings feels very like those of the ECB’s Jean-Claude Trichet at Davos in January 2007 when he told investors to brace for trouble. He said risk spreads had been compressed to dangerously low levels, though the boom was of course to run on for many more months....MORE
DOUBLE THE FUN WITH CBOE's VVIXSM Index
