XIV hedging rule helped protect Credit Suisse

Swiss bank guarded against ETN’s collapse by requiring counterparties to provide hedges in exchange for new units

Photo of Credit Suisse
Credit Suisse experienced no trading losses when XIV collapsed

Constraints imposed on the creation of new units of Credit Suisse’s short-volatility exchange-traded note (ETN) in mid-2016 helped the bank escape losses when the product collapsed yesterday.

The VelocityShares Daily Inverse Vix Short-Term ETN (XIV) lost 86% of its value – dropping from $109 to $99 at the close of US markets, before collapsing to $15 in after-hours trading – in response to the largest single-day fall in US stock prices since August 2011. The note was tracking a basket of Vix

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