Volatility, correlation and skew too

Surviving skew

rollercoaster-orange
Volatility and skew sent dealers on a rollercoaster ride

Painful memories of the 2008 market dislocations were evoked in May, as banks were presented with a remarkably similar set of violent upsets in volatility, skew, dividends and correlation.

In the second half of 2008 and early 2009, a spike in volatility and correlation, combined with a collapse in dividend expectations, was disastrous for virtually all dealers. Turmoil was particularly acute in the months following the Lehman Brothers collapse in September 2008, with some equity derivatives

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