Spike in equity vol sparks fears
A spike in equity volatility last month has caused some anxiety among equity derivatives dealers, many of which were short volatility. It has raised fears that a prolonged increase may generate hefty mark-to-market losses in equity derivatives trading books.
"If the current market environment persists, the negative impact of the accumulated volatility, correlation and dividend risk on the profit and loss of books may become significant," says Adrian Valenzuela, head of equity derivatives flow
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