About this episode

The episode discusses the challenges of pricing war risk in markets and the implications of current volatility signals and macroeconomic shifts.

This week’s Excess Returns Weekly Wrap breaks down the biggest market drivers right now, including how markets price (or fail to price) war risk, why volatility signals are flashing unusual warnings, and what options market positioning is telling us about potential downside. Featuring Jared Dillian, Brent Kochuba and D.A. Wallach, the episode also explores how macro regime shifts are changing diversification, how the Fed is reacting to rising oil prices, and why biotech investing is essentially a portfolio of options. Topics Covered • Why markets struggle to price geopolitical risk and war probabilities • The concept of “willful ignorance” in market pricing of obvious risks • Implied vs realized volatility and what the VIX is signaling right now • Why volatility premium is near historic highs despite a relatively low VIX • How options flows and hedging activity influence stock market movements • The risk of a sudden volatility spike and what could trigger a VIX move to 40 • The Fed’s dilemma with rising oil prices and inflation vs demand destruction • Why oil shocks can be both inflationary and deflationary at the same time • The idea of “path of least embarrassment” in Fed…

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