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Mark Gilbert

Volatility Dies, Hedge Funds Lose

The strange death of volatility may be sowing the seeds of the next financial crisis.
"It's worse than that; volatility's dead, Jim." 
"It's worse than that; volatility's dead, Jim." 

Since I wrote about the death of market volatility, first onMay 1and then again on May 13, others have weighed in on the issue. There's a growing consensus that not only is the disappearance of price swings hard to explain, it may prove downright dangerous at some point.

To summarize: volatility has fallen to record lows in stocks, bonds and currencies. Here's the relevant chart showing the Chicago Board Options Exchange VIX index, Merrill Lynch's MOVE index of U.S. Treasuries, and Deutsche Bank's Currency Volatility index: