Friday, July 27, 2007
Liquidity is dead...long live liquidity
As the unwinding of leverage across asset classes continues and the volatility term structure is "re-priced", it is worth noting that in environments when the volatility of volatility is high, the term structure if interest rates and expected returns is profoundly skewed to short-term securities. This rational tendency of participants has its own term strucure (i.e. when is panic abated?).