When Volatility Spikes, Financial Things Break - The Case of UK Gilts and Pensions

When Volatility Spikes, Financial Things Break - The Case of UK Gilts and Pensions

What is volatility and what causes it to rise and fall? How volatility itself contributes to more volatility such as in the example of the chaotic UK government bond market where long-term yields have increased by 4% in 2022.

Topics covered include:

  • How the role of volatility has changed in financial markets
  • What caused UK interest rates to spike and long-term bond investors to lose 50%
  • What is liability-driven investment
  • What drives increases in volatility and volatility spikes and spillovers are more frequent
  • How to earn income from shorting volatility and what are the risks
  • What we can learn when financial securities blow up


For more information on this episode click here.

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Show Notes

The volatility virus strikes again by Eric Lonergan—Financial Times

How ‘Liability-Driven’ Pension Funds Triggered UK Bond Panic by Loukia Gyftopoulou and Greg Ritchie—Bloomberg

UK government debt and deficit: December 202—UK Office for National Statistics

Markets are more fragile than investors think by Robin Wigglesworth—Financial Times

Volatility and the Alchemy of Risk: Reflexivity in the Shadows of Black Monday 1987—Artemis Capital Management

What Caused the Volatility “Volmageddon” on 5-Feb-2018 by Vance Harwood—Six Figure Investing

Gamma Explained—Merrill

Delta Explained—Merrill

Inside Volatility Trading: Is VIX Backwardation Necessarily a Sign of a Future Down Market? by Scott Bauer


Investments Mentioned

WisdomTree CBOE S&P500 PutWrite Strategy ETF (PUTW)

Simplify Volatility Premium ETF (SVOL)


Related Episodes

159: What You Need To Know About Volatility

283: Why You Should Care About Carry Trades


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