Volatility, correlation and skew too

Skew skyrocketed while volatility and correlation spiked in May, reviving memories of the carnage inflicted in the months that followed the bankruptcy of Lehman Brothers in 2008. The dislocations are rumoured to have caused losses for some exotic equity books. How did dealers respond? Matt Cameron reports

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

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here