Two years after the peak of the financial crisis the tail risk that defines such events has not been forgotten, in the equity markets at least.
In the universe of equity volatility products (Vix), there has been an ever-increasing demand for Vix products to hedge equity market tail risk and other equity exposures, which is attracting new market participants and new trading strategies. The average monthly trading volume in Vix futures on the Chicago Board Options Exchange has almost quadrupled this year compared with the same period last year, while in May volumes were 8.5 times the average of the year before, as a result of the May 6 flash crash and the European sovereign crisis.
New pit
This increased activity has prompted the CBOE to convert a large unused trading pit into a space for buying and selling Vix products, because there’s no longer enough room in the...
