Volatility and the Alchemy of Risk

Artemis Capital Management

Christopher Cole

Research

19 Pages

Artemis Capital Management explores how ultra low volatility, central bank stimulus, and systematic trading strategies may be creating hidden fragility across financial markets. The paper argues a $2+ trillion short volatility ecosystem could amplify shocks, drawing parallels to the feedback loops behind the 1987 crash.

Key Takeaways

Short Volatility Boom: The paper estimates the global short volatility trade exceeds $2 trillion, including roughly $1.4 trillion in implicit exposure tied to systematic investment strategies.
Buyback Driven Markets: Since 2009, U.S. companies spent $3.8 trillion on buybacks, contributing roughly 40% of EPS growth and 30% of stock market gains.
Extreme Volatility Risks: Artemis argues markets underestimate both near term VIX declines below 9 and long term spikes above 80 during future credit or inflation shocks.
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