Black Swan Protection: PIMCO
Firm to sell hedges against tail risk.
BY Pensions & Investments | July 20, 2010
Morgan Stanley strategists estimate demand for hedges against such cataclysms helped drive as much as a fivefold increase last quarter in trading of credit derivatives that speculate on market volatility.
The efforts to protect against another disaster, which helped drive up the relative costs of the most bearish credit derivatives to the highest in two years, show that investors’ psyches still haven’t recovered from the Lehman bankruptcy on Sept. 15, 2008, which erased $20.3 trillion in stock market value worldwide and caused credit markets to freeze. Full article here.