The 29th Annual CBOE Risk Management Conference (RMC), wound down Tuesday, proving that while Chicagoans and New Yorkers were happy enough just to escape the snow, there were some excellent business reasons for making the trip to southern California.
What I like to call the “VIX Summit” is no doubt the best place for VIXophiles to congregate, get acquainted, and exchange ideas related to a subject that tends to be arcane and poorly understood in most quarters, yet is increasingly embraced by a wide variety of practitioners. Nancy Davis of AllianceBernstein probably summarized best what is happening in the volatility space when she identified three trends that are driving institutional use of options:
- New entrants
- Cross-asset class opportunities
- Structural differences
In terms of new entrants, the VIX product space is seeing a wide range of new institutional interest from hedge funds and proprietary trading firms to CTAs (commodity trading advisors), insurance companies and other firms, many with an international flavor. One of the common themes is the search for yield enhancement strategies. A lot of this activity can explain the recent surge in volume in VIX futures and VIX options. Whereas VIX ETPs had been driving volumes in VIX futures in the past, now growth is being driven by the participation by a broad range of new institutional players, some of whom are “curve hopping” from Treasuries to the VIX and many of whom are motivated by the lack of compelling alternatives to enhancing yield.
In these types of events there is always one presentation that catches you by surprise and gives you a lot of ideas to ponder that had not necessarily been on your radar. For me that presentation came from John Coates, the author of The Hour Between Dog and Wolf: Risk Taking, Gut Feelings and the Biology of Boom and Bust. In a wide-ranging talk, Coates has some compelling observations on physiological systems and how these are intertwined with everything from pleasure and addiction to expectations, uncertainty and risk assessment. Frankly, even if the subject of trading was not directly incorporated into this presentation, this talk still probably would have left me with more to chew on than the other presentations.
In the U.S., the RMC alternates between Florida in even years and southern California in odd years and is typically held during the last week of February or the first week in March. Last year a CBOE RMC – Europe conference was added in Ireland. The success of that conference has translated into a repeat performance that is scheduled for September 30 – October 2, 2013 at the Penha Longa Hotel in Sintra, Portugal, just outside of Lisbon. As a port fan who has never been to Portugal, I can certainly envision a trip to Portugal in September in addition to Florida next year.
Last but not least, thanks to all those I the pleasure of meeting this week.
Disclosure(s): the CBOE is an advertiser on VIX and More; VIX and More is a sponsor of the CBOE Risk Management Conference