This Is the Market’s Latest Problem Child
- Over 400 ETPs use derivatives to generate outsized returns
- ‘The greatest disasters in finance made the same mistakes’
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With the sudden demise of an exchange-traded product that bet against volatility, investors are asking: What else is lurking out there?
The implosion of the $1.9 billion exchange-traded note known by its ticker XIV came out of the blue. One week, investors were pouring money in at a record pace; the next it was hemorrhaging over 90 percent of its value. XIV used Cboe Volatility Index futures to bet on market calm. But it fractured Monday when the VIX jumped the most on record, and is now being shut down.