Ben Eifert
speaker
517 appearances
1 recordings
1 series
first heard Feb 2025
last heard Feb 2025
Ben Eifert’s voice in public audio — every appearance, attributed to the second.
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Appearances
Which means where is implied volatility for the SP, for example, which is one of the biggest parts of this ecosystem for very short-term options, one month, two month, three month, six months, one year.
And what does that term structure look like if you compare it to history?
And what you'll find is really in the evolution that you've had in that post-2012 regime has been the volatility term structure getting steeper and steeper and steeper.
So lower in the front and steeper and steeper, kind of all the way out to the back.
And the reason for that, again, is that the front is being sold very, very, very heavily.
And people who are getting put into a lot of the front,
like market makers and like volatility arbitrageurs then have to go further out the curve to hedge.
You see that very distinctly.
Another thing you can look at is volatility risk premium.
Uh, which is something you kind of have to estimate and look at empirically.
It's not just the shape of a volatility term structure, but that is what is implied volatility?
Relative to subsequent realized volatility.
So implied volatility is supposed to be forecasting realized volatility, how much the market actually moves.
And the spread between those two is a risk premium.
You sh if you're selling options, you should get paid a risk premium.
It's a risky, long beta kind of thing to do.
So you should get paid some amount of money for that.
In the old days, before 2012, you used to get paid a decent amount of money for that, maybe.
three volatility points on average.
In the you know, more recent years that compresses and compresses down to one point or a half a point.
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