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Tag Archive: Implied volatility


In this world of uncertainty where life do not has guarantee, people aspire for guaranteed returns. The recent posts SONY DSCdone on my blog pertains to are market’s overvalued and volatility .That how a financial television especially is built on the idea of using volatility, wherever it may be, to capture eyeballs

The Warren buffet latest (2015) letter to the Berkshire Hathway shareholders is a great – great read especially from the page 24 onwards. Here is the link Berkshire Hathway Letter
Some of the smartest blogger have shared their thoughts on the volatility & risk from the letter .

Josh Brown writes:-
The modus operandi of a lot of Street denizens is to present something as a problem for you so that they can sell you the solution. By putting the fear of volatility in front of you as though it’s a serious long-term risk, the door is then opened for all manner of high-cost, horrifically ineffective products or strategies. My partner Kris likes to say “the easiest way to sell someone a map is by first convincing them that they’re lost.”  Continue reading

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Zero Hedge is one of my favorite blog on the risk analysis and for the global events, the blog argues that we are living in the Golden blogAge of Central Bankers, and that wreaks havoc on the fundamental nature of market expectations data.

  • The VIX  (Volatility Index) is not a reliable measure of market complacency.
  • The wisdom of crowds is non-existent.
  • Fundamental risk/reward calculations for directional exposure to any security are problematic on anything other than a VERY long time horizon.
  • I’d rather be reactive and right in my portfolio than proactive and wrong.

The Golden Age of the Central Banker is a time for survivors, not heroes. And that’s the real moral of this story.

Let’s dig deep to understand the most basic question in risk management. Continue reading

CDS & SWAPS

After a long time I am putting few basic quiz questions,  Lets check out who hit the bull’s eye. You can provide your answers by putting imagesup the comments , there are only two questions but they will help to understand the basics OTC derivative market:

  • What is correct about a credit default swap (CDS)?
  1.  A CDS is the exchange of two cash flows: a fee payment and a conditional payment, which occurs only if certain circumstances are met.
  2. The CDS will have value for the protection seller only if defined credit conditions are met
  3. The protection seller will always receive the premiums.
  4. CDS is a type of insurance in which default of an asset triggers payment Continue reading
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