- Before whirlwind, banks turned volatility into the hot item
- ​VIX was seen as sure thing — until it suddenly wasn’t anymore
It was the hot trade on Wall Street, a seemingly sure thing that lulled everyone from hedge fund managers to small-time investors.
Now newfangled investments linked to volatility in the stock market — until a few years ago, obscure niche products — have exploded in spectacular fashion. The shock waves have only just begun.
How these investments proliferated is a classic story of Wall Street salesmanship and old-fashioned greed. In a few short years, financial engineering transformed expectations about the ups and downs of the stock market into an asset class that could be marketed and sold — as tradable as stocks but, it turns out, sometimes far riskier.
Dakin Campbell, Dani Burger, Donal Griffin, & Carolina Wilson | Bloomberg