The Great Volatility Crush

Ten years ago, when I worked on the equity index derivatives desk at Lehman, we used to sit around and dream things up. Like, we wondered out loud if you could actually create a volatility ETF.
It seemed like a brilliant idea. Who wouldn’t want to buy volatility? There were some studies going around that said holding volatility as an asset class alongside a diversified portfolio could improve the portfolio’s risk characteristics.

Around the same time, the Chicago Board Options Exchange (CBOE), owner of the VIX Volatility Index, was busy thinking up ways to securitize the Index. So it listed futures on the VIX, allowing investors take a long (or short) position in a VIX future and be positively (or negatively) exposed to changes in volatility.  (more)

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