Vol and correlation cause equity derivatives pain

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Equity market trauma in Europe and the US has hit dealers and hedge funds through soaring levels of volatility and correlation on major stock indexes. Traders say the losses could easily run into hundreds of millions of dollars.

Over the past month, major stock indexes on both sides of the Atlantic have been struck by worries over European government debt, a sudden plunge in the S&P 500 index on May 6 and fears over Spanish banks.

“This past four weeks has been a period of very high volatility a

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