Fear Is Waking Up—And The Real Spillover Hasn’t Even Started

Vol is waking up

Index vol has moved higher, but remains rather low in absolute terms. Meanwhile, the warning signs are multiplying: oil vol, skew, VVIX and JPY vol are all moving sharply higher, while realized correlation sits at record lows.

The repricing may have started, but cross-asset signals suggest it may have further to run. With CPI, the yen carry unwind and a potential return of correlation all in play, optionality still looks too cheap.