Can it only be a year ago that volatility was so low in the financial markets? Traders must have found their lives awfully dull, without so much as a currency crisis to get the pulse racing. Some began to argue that volatility had moved to a structurally lower level thanks to the activity of hedge funds and to the development of complex products and derivatives. A new, more sophisticated financial system had spread risk more efficiently, it was said. But over the past 12 months, the standard measure of stockmarket volatility, the Vix (or volatility index), has roughly doubled. On top of that, there have been wild swings in government bond yields, a jump in debt spreads and the continuing decline of the dollar.
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