Volatility Inc.: Inside Wall Street’s $8 Billion Mess

  • 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

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