Volatility arbitrage though not new, has taken on a new dimension, as several new hedge funds have begun to deploy strategies involving VIX futures and options. We’ve seen the VIX universe continue to expand in surprising ways. For instance, a major investment group that principally trades energy and interest rate products, recently became a Trading Privileged Holder, or TPH at CFE. Other new users include European investors trading VIX products against fee stocks, a measure of volatility of the Euro Stocks 50. And banks in Brazil, now actively using VIX products for macro hedging. We also see increasing numbers of customers that sell implied volatility short, which has been an active topic in many trading forums. Its important to note we are still in the early stages of developing previously-identified customer segments globally, such as hedge funds, CTAs, proprietary trading firms and institutional investors. Many customers in these categories are early adopters meaning there is considerable room to further expand every category of VIX user. Quite simply, we believe investors of every type can potentially benefit from the added dimension of pure volatility provided by VIX futures and options, and that education is the key to unlocking that potential. – Ed Tilly CEO, CBOE (Q1’2014 Earnings Call, source: www.SeekingAlpha.com)
A very informative and insightful video by Ron Insana. He was able to see the real estate bubble building up during end of 2002, which was probably the early stages of the real estate bubbble, which peaked 5 year later by end of 2007, followed by crash in 2008. A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Continue reading
The value of a business depends on what the purpose of the valuation exercise is aimed for. Is it for raising new investment via minority share sale, or majority stake sale, or for bankruptcy? State/country specific laws also plays a role in valuation. Investors may still attach a positive value to a company undergoing bankruptcy proceedings, like in the case of United Airlines. Under what standard of valuation are we doing this valuation: Fair market value vs Investment value?
Paul Singer has survived in the financial markets for 40 years, and that means a lot. He has seen almost every kind of event and volatility, and that kind of experience brings valuable insights for all of us. His cautious view for 2014 given the steep run up in stock markets with easy money from the US Fed Quantitative Easing (QE) over last 5 years since 2008. Here’s a brief interview with him at Davos in Jan 2014.