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August 23, 2007
Volatility and Its Derivative
Savvy comment from Emanuel Derman on the current quant fervor:It always seemed to me, and recent occurences seem to confirm it, that most algorithmic trading strategies are long volatility but short volatility of volatility.Nicely put.
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It's a very good statement. The academic sorts (and let's face it, the PhDs running the models at the quant funds are exactly that) will tell you that volatility is the thing in the markets that most tends to persist.