63 min listen
Andrew Scott, Partner, Head of Client Solutions Bach Option Ltd.
FromAlpha Exchange
ratings:
Length:
51 minutes
Released:
May 6, 2021
Format:
Podcast episode
Description
After a 6 week hiatus during which I was recovering from a serious jet ski accident, I am excited to bring you a fresh episode of the Alpha Exchange. And it was wonderful to spend time with Andrew Scott, a Partner and Head of Client Solutions at Bach Option. Our conversation is an exploration into the complex factors that drive the clearing price for volatility in equity markets. In this context, we spend no time on the economic cycle or corporate profits or the latest missive from the Fed. Instead, Andrew explains how the vast industry of Asian structured products leaves banks with complex exposures to optionality, correlation and dividends. These trades, designed to create income in countries like South Korean that have seen interest rates in secular decline, leave banks with substantial long vol positions. Through our conversation, we learn of the concept of “peak vega”, an industry estimate for the level of the underlying index where bank’s are most long vega. Andrew also lays out in great detail the risk recycling that has long operated alongside the structured products universe. Here, depressed levels of index vol and skew in Asia encouraged hedge funds and asset managers to implement volatility relative value trades versus the S&P 500. Lastly, we touch on Andrew’s new position at Bach Option, joining founder Miao-Dan Wu in building out a firm dedicated to understanding and trading volatility at a time of great change in markets and plenty of catalysts for the next volatility event. I hope you enjoy my discussion with Andrew Scott.
Released:
May 6, 2021
Format:
Podcast episode
Titles in the series (100)
Eric Peters, One River Asset Management: Beginning his career in Chicago trading corn futures in the late 1980’s, Eric Peters moved into the sharp elbowed world of bond futures trading on the CBOT and then went to a bank, prop trading rates and derivatives through the 1990’s. His perspectives on the exchange rate mechanism crisis in 1992 and the bond market massacre in 1994 provide significant insight on the way in which policy frameworks invite risk taking that can ultimately lead to instability. Utilizing many of these lessons on risk, Eric founded One River Asset Management, a firm that delivers bespoke solutions to institutional investors, helping them navigate markets in the post-crisis era. As 2018 comes to a close, Eric sees a long period of adjustment to a higher volatility regime in both the risk asset complex as well as inflation. by Alpha Exchange