Commodities, like equities, tend to be less volatile than their option prices imply. That drives up implied volatility relative to realised volatility - a phenomenon that has been widely exploited in structured products linked to popular stock market indexes. But in 2013, Deutsche Bank decided to apply the idea to Brent crude oil, coming up with the DB Brent Short Volatility Index.
In a directionless oil market, the product has proven popular. More generally, with most commodity indexes ending 2
The week on Risk.net, December 2–8, 2017Receive this by email