Surviving skew
Skew skyrocketed in May, breaking through levels last reached in 2008 after the bankruptcy of Lehman Brothers, while volatility and correlation also spiked. The dislocations are rumoured to have caused losses for some exotic equity books. How did dealers respond? Matt Cameron reports
There's a saying that lightning never strikes the same place twice. Tell that to equity derivatives traders. Painful memories of the 2008 market dislocations were evoked in May this year, 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
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