another reason for the extreme volatility on Sunday night and into Monday is from the growth in passive/systematic "alpha harvesting" strategies. As they proliferate you have to go further out the curve for incremental edge (VRP, Vol of Vol, dispersion, short correlation, QIS, etc.) and you are extracting that edge with increasingly complex strategies with fragile structures. So when you get a small disturbance it creates an outsized response. Another way to frame this is to point out that there are not as many true risk warehousers today as their used to be. Part of this is the decline in active management, part is the regulatory market structure, part is the demand from investors for min-risk return and the ability to create really fancy systems that look good on the surface and can raise AUM.
another reason for the extreme volatility on Sunday night and into Monday is from the growth in passive/systematic "alpha harvesting" strategies. As they proliferate you have to go further out the curve for incremental edge (VRP, Vol of Vol, dispersion, short correlation, QIS, etc.) and you are extracting that edge with increasingly complex strategies with fragile structures. So when you get a small disturbance it creates an outsized response. Another way to frame this is to point out that there are not as many true risk warehousers today as their used to be. Part of this is the decline in active management, part is the regulatory market structure, part is the demand from investors for min-risk return and the ability to create really fancy systems that look good on the surface and can raise AUM.
Is the answer to jeopardy $6,999
yep