How do large delta hedging flows of market makers tie in with Central Bank quantitative easing? How do ETF rebalancing’s and structured note issuer movements shift markets? We sit down with options guru Hari Krishnan talk through his new book: Market Tremors - Quantifying Structural Risks in Modern Financial Markets. 

Hari's first book, The Second Leg Down, talked about what investors can do when they're in trouble and how to structure actual options trades to keep bleed under control and maximize protection. This time, he's zooming out and asking how to know when there might be trouble lurking. How we can quantify and identify events like Volmageddon (Feb 2018), the Swiss Franc depeg (Jan 2015), Game Stop run up (2021), and more. In a world where we often get bogged down considering how specific items like this gamma, or that Fed decision, or how large ETFs flows will impact markets, Hari masterfully weaves all those 'agents' together to consider how we apply a real world risk to these agents shifting the distributions we rely on to size investment positions. Enjoy the episode.

Chapters:

00:00-03:13=Intro

03:14-06:34 = Volatility - The Last Chance Saloon

06:35-15:20 = There’s London Whales Everywhere

15:21-31:55 = Merging Normally Distributed & Networked Chaos

31:56-42:01 = Volmageddon: A Case Study

42:02-54:19 = Big Gamma: Market Making Options / Do Less

54:20-01:09:43 = The Danger of 1 / Volatility Position Sizing

01:09:44-01:17:37 = Takeaways & The Twin Heralds of Risk

Follow Hari on Twitter @HariPKrishnan2 and check out his book here.

From the episode:

Don't forget to subscribe to The Derivative, and follow us on Twitter at @rcmAlts and our host Jeff at @AttainCap2, or LinkedIn , and Facebook, and sign-up for our blog digest. Listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. RCM Alternatives is DBA Reliance Capital Markets II, LLC. For more information, visit www.rcmalternatives.com/disclaimer