{"id":"asset_eba870769ec4","type":"text/plain","category":"text","name":"09-volmageddon-2018.txt","size_bytes":3551,"title":"09 volmageddon 2018","description":"An analytical account of the February 2018 collapse of XIV, a volatility-linked exchange-traded note. It examines the instrument's mathematical properties, its disclosure practices, the regulatory framework that permitted its sale to retail investors, and the question of whether accurate prospectus language constitutes adequate risk communication.","extracted_text":"# A Product Engineered to Fail, Sold to People Who Could Not Know: February 2018\n\nOn 5 February 2018 the VIX index roughly doubled in a day. The following morning\nCredit Suisse announced the acceleration of XIV, an exchange-traded note that\nheld short positions in VIX futures. It had lost about 96 per cent of its value\nin a matter of hours. Around $2 billion evaporated. The Dow fell 1,175 points,\nits largest single-day point decline to that date.\n\nXIV was not a fraud and it was not mispriced. It did precisely what its\nprospectus said. It sold volatility futures and collected the premium that\naccrues because those futures usually trade above spot. In a calm market this is\na superb trade, and between 2011 and 2017 XIV returned roughly 100 per cent\nannualised. The prospectus also disclosed, in plain language, that the note could\nlose all its value in a single day, and specified the acceleration trigger at an\n80 per cent intraday decline.\n\nSo the disclosure was accurate. My argument is tha","attributes":{},"usable_for":["financial product design failure analysis","regulatory gap documentation 2018","retail investor protection debate"],"provenance":"original-work","provenance_note":"An original analytical essay by its author.","kind":"analytical essay","reliable_for":"The author's argument about financial disclosure and retail investor protection, and the evidence it cites.","describe_v":6,"price_sats":{"card":0,"full":200},"content_available":true,"available":true,"retained_offered":false,"embed_offered":false,"licences":{"single-task":{"sats":200,"grants":"use for one task, then let go"},"retained":null,"embed":null}}