VIX Futures and the Financial Crisis
On Twitter the other day, dvolatility asked: [W]ere VIX futures in contango pre banking disaster? Just to review, contango is a condition in the structure of a futures market in which spot or short-term prices for a commodity are lower than the prices for longer dated contracts. For non-perishable goods, contango is a common state of affairs, since longer-dated contracts will include carrying costs such as warehousing and forgone interest. Contango may also result from expectations that the underlying will rise in price by…
Wednesday, January 28, 2009
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