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Opinion
Matt Levine

Is VIX Manipulated or Hedged?

Also Uber drivers, financial technology, Fannie and Freddie and a crypto tween.

Vol and VIX.

Credit Suisse AG issued an exchange-traded note called XIV, the VelocityShares Daily Inverse VIX Short-Term ETN, which we have talked about a bunch recently. XIV is a debt of Credit Suisse in an amount that is inversely related to the prices of some futures on the CBOE Volatility Index, the VIX: Each day if the VIX futures go down, Credit Suisse owes XIV holders more money; if the VIX futures go up then it owes them less. In the prospectus for XIV, Credit Suisse tells investors that it plans to hedge XIV. The way the XIV hedging theoretically works is that when the VIX futures go up, Credit Suisse goes into the market and buys futures; when the futures go down, Credit Suisse goes into the market and sells futures.