Coronapocalypse: volatility makes a comeback, are markets ready?

There’s only one thing that’s certain about the markets: volatility is back.

The listed space for volatility is dominated by the CBOE, which is a virtual monopoly, said Andy Nybo, managing director at Burton-Taylor International Consulting. Nybo recently authored a report about the landscape for volatility trading from an industry perspective.

“There’s a whole volatility ecosystem that has been created through not only the VIX complex, but also through OTC markets, with variance swaps (and) custom swap products,” explained Nybo. “It’s become an incredibly important part of the trading landscape, particularly if you are managing risk and trading derivatives as well as the underlying equities.”

The challenge, he noted, has become how to get exposure: “It’s clear that there’s demand for competition, and demand for different products that the industry could use to manage their volatility exposure,” said Nybo.

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