Jun 11, 2012

Asian Volatility Futures Lack Liquidity

An article about a month ago in the Risk magazine noted the lack of liquidity in asian volatility products. Despite volatility rise and continuing global economic concerns (that seemed to be good for VIX liquidity) futures like RTSVX in Russian Federation, VNKY in Japan, and VHSI in Hong-Kong have not picked up in trading. At the time of writing Nikkei Volatility futures have a total open interest of 107 contracts, VHSI 45 contracts, and RTSVX only 12 contracts. It makes sense that traders are more inclined to use VIX or VSTOXX (European volatility index) futures.

P.S. Interesting presentation from Lawrence McMillan - people paying too much for protection, premiums too high, protection does not work. He mentions that only US markets seem to have term structure "distorted", US being the biggest vol derivatives market. This is definitely something to investigate further.

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