Continuing [4]our romp through the world of financially-revised, centrally-planned Christmas carol cheer, here is Citi's Matt King with his remix of O Little Town Of Bethlehem.
O little tail of downside risk
O little tail of downside risk
How still we see thee lie!
Awash with deep and dreamless greeks
The spreadsheets cannot lie.
Yet in thy dark cells shineth
The markets’ scope for fright
The hopes and fears of traders’ years
Are met in thee tonight.
For selling vol this rangebound year
Has seldom gone astray.
With bears asleep, the hedgers keep
Being killed by time decay.
And central banks encourage
The reckless search for yield
They’ve said they’ll do whate’er it takes –
No wonder risk appeals.
How casually, how frighteningly
The risks are now dismissed.
Spain’s fall to junk, Greek exit
The looming fiscal cliff.
For recent years do demonstrate
The power of QE.
What matters sovereign solvency
When you have OMT?
But history says when vol is low
There lies complacency.
The worldly wise should use this time
To buy convexity.
For if crisis strikes, then all assume
The powers will intervene
But where there is consensus
There tail risk lurks unseen!