Wither Volatility. 

From bitter experience as a former EM debt trader, I know it can be asymmetric — much lower on the way up as prices grind higher — but can spike sharply on the way down as they crash. 

Not that any of this info was built into the symmetrical normal distributions fed into our value-at-risk trading models which determined the size of our trading positions! As vol picked up on the way down, we were forced to sell more into an ever illiquid market. 

Reading Deutsche Bank’s Jim Reid’s excellent commentary on Thursday, I was intrigued by the stock market’s reaction to Fitch’s downgrade of the US to AA+. The S&P 500 fell 1.5%, which seems muted, but I was amazed to find it was the largest move since April, an incredible 40 days earlier. A year ago, we regularly saw up or down 2% days, with intra-day moves often a lot higher.