A jump in US equity market volatility is sparking interest in pre-crisis dispersion structures that ditch the long-volatility bias found in the trade in recent years.
Sustained demand for the trade would be a sign of changed volatility expectations, dealers say – the so-called theta-flat product makes most sense in a higher-volatility environment. Its vega-flat alternative had become standard in the post-crisis years when volatility was low.
“If we see a widespread shift to theta-flat disper
The week on Risk.net, September 8-14, 2018Receive this by email