The annual CBOE Risk Management Conference was held last week in Bonita Springs, FL, and it was a great opportunity to meet some old friends, make new acquaintances, and hear from some industry leaders. I thought I’d share some of my favorite moments from the conference sessions.
The most important news from the conference was the announcement by CEO Edward Tilly on Tuesday that, beginning in June, the exchange will offer nearly 24-hour trading in VIX futures five days a week. The CBOE has been gradually expanding VIX trading hours over the past year, and it seems clear there is investor appetite for wider availability.
The Tuesday keynote from Marvin Zonis, emeritus professor at Chicago, was about various global political risk scenarios. One interesting fact about his presentation was that he spent as much time on domestic U.S. politics as on any other single topic: he highlighted stagnant wages amidst surging productivity and warned about the unwillingness of Congress to address inequality.
My favorite session was also on Tuesday morning: Maneesh Deshpande from Barclays gave an excellent overview of the sources of supply and demand for options and volatility products. For example: he noted that one long-standing source of demand for SPX premium – insurers hedging risk from variable annuity products – was gradually declining as those insurers shift heavily into target volatility funds; the expected effect would be decreasing demand for long-dated puts, but higher realized volatility in the equity market as those managers actively rebalance between equities and cash/bonds. He also spent a lot of time on the impact of flows in volatility ETPs (VXX, XIV, etc.) and how that demand has changed the VIX curve.
In the afternoon, the talks by Puneet Kohli (Healthcare of Ontario Pension Plan) and James Hosker (Société Générale) covered a lot of cross-asset ideas and discussed volatility in non-equity assets. Hosker worked through a whole series of trade theses and options structures to implement them, and I always love hearing smart researchers pitch ideas.
One Wednesday session that made a lasting impression was on the volatility of volatility: Edward Tom (Credit Suisse) and John-Mark Piampiano (Pine River) showed how and why investors analyze the vol of vol. Tom discussed trades for monetizing convexity and how traders think about VVIX (VIX methodology applied to VIX options). Piampiano looked at whether VIX and SPX options were fairly priced within an arbitrage context. One of his conclusions was that, while VIX calls were overpriced in the years immediately after the financial crisis, in 2013 and 2014, SPX puts have actually been more expensive on a carry-neutral basis.
There were several other sessions that generated ideas worth further study. The panel on volatility as an asset class included some lively debate about how asset managers think about volatility and liquidity. A session with Dominic Salvino (Group One) and William Speth (CBOE) included a very helpful, detailed discussion of the VIX SOQ process and why more traders should consider participating in the settlement auction. I hadn’t seen Sheldon Natenberg (Chicago Trading Company) speak in person before, and his and Trevor Mottl’s (Susquehanna) session was interesting as well. Weather delays meant I missed most of the Monday talks, but people seemed to find them helpful.
The conference afforded many opportunities to socialize with everyone there and was a great experience overall. I certainly plan to be there next year.