Month: July 2012

Volatility White Papers: Power Laws & VIX Options Explained

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Recommended Papers  Tales of the Unexpected by Andrew Haldane This accessible paper (only one equation) is the best that I’ve ever read on the differences between processes accurately modeled by Gaussian/normal distributions and those better matched by power law distributions.   I have seen this distinction made many times, but this paper provided examples and reasoning that really helped me internalize the differences.   Most of our stock …

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How Does PHDG Work?

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An ideal volatility investment would hold its value during quiet times and then ride volatility up as the market panics.  Barclays’ VQT and Invesco’s PHDG are two Exchange Traded Products (ETPs) that are designed to fill this need. These two products use the same methodology but differ in that VQT does not distribute dividends, effectively automatically reinvesting dividends, while PHDG distributes any dividends quarterly.  The …

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TVIX’s Fate—Fade to Black?

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Update TVIX is alive, and well.  For information about TVIX’s  reverse stock splits see this post ————————————-. Things have not been well with TVIX since Feb 21st, 2012 when Credit Suisse stopped the share creation process.   In late March 2012, a modified creation process was put in place, but that has only been partially successful—the TVIX price has often been floating 5% to 10% above …

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