Equity derivatives – a 'new' old volatility regime?

After spending the last several years in a low-volatility environment, we use two distinct periods of market stress (LTCM and the 2002 credit crisis) to examine the recent market turmoil and the volatility landscape ahead

Background

The summer of 2007 marked the onset of the most extreme bout of market turbulence in the past five years and likely the beginning of a new volatility regime in equity derivatives. Short volatility across nearly every asset class (equities, rates, foreign exchange, credit) has been the single most substantial source of consistent return for investors in recent years as an exceptional degree of transparency in the global economy paved the way for low actualised volatility. While 'the'