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Forget dvega/dvol, that's an effect, rather than a cause... Fundamentally, it's all about vol itself being a stochastic variable. In certain models, its behavior is described by a PDE that, among others, contains a vol of vol parameter. Intuitively, this parameter in an SV model like SABR...

Well, where to begin... Note these are all my personal opinions, nothing more. Firstly, the Swedes (Riksbank) in the early 1990s and the Swiss (the SNB) last year have probably been the best at handling/recapitalizing the banking system. Quick, efficient and, ultimately, at low cost to the...

if hyperinflation happens, the last thing you'd want to do would be to use hard assets to repay your mortgage (assuming it's a normal fixed-rate one)... Being a nominal (fixed-rate) borrower during periods of high inflation is great, since inflation eats away at your liabilities. So property...

Credit indices, ccy TWIs, benchmark bond yields, mkt inflation rates, sov CDS levels, short-rates and spreads, commodities, current eco releases.

Greece will not be allowed to default...

Wouldn't steep skew actually make a ratio put spread "easier"? Specifically, all else being equal, it will make it cheaper to get into...

You would expect to see two things: a) very low percentage participation by indirect and direct bidders. These are basically end investors (including foreign CBs), rather than the primary dealers (who have to buy at auction). b) a large yield tail, i.e. the difference between the yield at...

The coupon is the amount of interest the bondholders will be receiving (coupon given is annual, but paid semi-annually). Higher or lower coupon doesn't mean anything (coupon is set at a nearest nice 1/8th of a percent number, such that the bond starts trading as close to par as possible, if...

Huh? What do you mean 'leave their fixed mtge'? This is not about buying an overpriced home. It's about a problem with mis-aligned incentives at every step of the housing value chain. Starting with the buyer all the way to the end investor and the central bank. It's an issue of coordination...

Hmmmm, let's see... Did individual actions of free individuals in the US mtge mkt lead to better, fairer, more efficient, nicer results? What you're describing is the simplistic theory. In practice, there's all sorts of coordination issues. [B] The point is not to outsmart the community...

Fine... And even more cynical cynics (:)) like me would respond (as I usually do) to your statement thus: "We need a Central Bank because it makes it a little bit more difficult for the politicians (the elite few) to easily strip wealth from the productive members of the economy, and to...

Well, I am in the staunch pro-CB camp. If there's anything that the crisis has taught us, it is that we still don't know how to deal with the fundamental problem of any capitalist economy, specifically, the provision of public goods. I am not saying that the Fed is THE solution, as I think...

Counterfactuals aside, I'd be very happy to listen to any and all logical arguments arnd why the existence of the Fed has made the situation worse.

IMHO, they are necessary for a dynamic modern economy... I am not entirely sure what sorts of responses you're looking for. Fundamentally, the idea behind the Central Bank is that the provision of 'lender of last resort' facilities, as well as management of money stock, is a public good...

Opportunities to lose one's fingers! Every one of these is a falling knife...

I don't need to see pictures... I am staring at 5Y Greece cheapening arnd 50bps to Germany today. I have to say this is where I get tempted, against my better judgement...

It's the volatility of volatility, not dvega/dvol... In some stochastic vol models (e.g. SABR), it's a parameter used to quantify the "steepness" of the smile. If vol of vol is high, wings are very expensive. That may be where you're getting your fly reference.

To be fair to Greece, it wasn't just them yesterday. Portugal was also put on negative watch.

Only thing I could suggest is for you to use your current job to talk to people in the mkt. If you can't talk to traders directly, communicate with your fellow risk-managers any way you can. They might give you leads. Eventually, you'll be able to get a useful connection that will pay off.

Ooooh-la-la... I think you need a bit more education. Black-Scholes doesn't pretend anything. In a flat vol, vanilla BS world a very explicit assumption is made about the probability distribution of the underlying price process. The key thing you need to realize is that the limitations of...