Periods of low volatility are not unusual and have tended to last in past instances as the macro backdrop was very supportive, with improving growth, anchored rates, and inflation, Goldman Sachs strategists including Christian Mueller-Glissmann write in a note.
Since 1928, there were 15 low volatility periods that lasted 18 months on average
Many volatility spikes in the past were hard to anticipate because they often occurred after unpredictable events
Still, volatility regimes are closely linked to the business cycle; low jobless rates tend to anchor volatility for stocks and rates while growing unemployment signals recession risk and a higher vol regime
A period of prolonged low volatility may lead to excessive risk taking and can mask correlation risk in multi-asset portfolios
It’s time to consider “all options”; Goldman likes cash extraction through equity calls and put spreads to hedge tail risk
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.