Normal brain: there is a variance risk premia to be earned Genius brain: volatility can only go down Galaxy brain: ~*~ volatility might go negative ~*~pic.twitter.com/CaK7MomC9J
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This is from the WSJ write up of Infinity Q Diversified Alpha, the mutual fund that misvalued a bunch of weird equity derivatives to hide a $500m losshttps://www.wsj.com/articles/behind-the-mysterious-demise-of-a-1-7-billion-mutual-fund-11618911000 …
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One of the misvaluations was, uh, marking a profit on a variance swap position that would only have been possible if volatility had traded negative
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