Goldman Warns Of Rising “Shock” Risk To Risk Parity Investors

Last Thursday, when the VIX briefly soared from 10 to 15, crossing the level which Marko Kolanovic previously said could lead to “catastrophic losses” for systematic funds and vol sellers, we asked two questions: “i) Will today’s selloff lead to a broad deleveraging among vol-sellers who are forced to cover into a sharply rising VIX, and ii) will the risk parity funds finally be forced to unwind?”
While the VIX surge was short-lived (thus answering question i) with the VIX tumbling back to 11 by EOD, it allowed us to trot out our favorite risk-parity chart, a matrix showing implied deleveraging thresholds for a large cross-section of the risk-parity industry, based on intraday moves in equities vs bonds.

This post was published at Zero Hedge on Jul 3, 2017.