125 days ago • Posted by Martin Boujol
Global markets hit by a hug VaR shock: MS analysis
Greed seems to beat fear at the start of 2021. Hedge funds were at a record leverage a few weeks ago, long-only institutions had a record-low cash balance. In the meantime, retail investors have bought record volumes of options and pushed their margin debt to the extreme. A series of retail-orchestrated short squeezes has forced hedge funds to de-leverage, and major indices sold off 3-5%. However, according to analysts at Zerohedge, such VAR shocks usually happen in growth phases and tend to dissipate rather quickly.
Source: Morgan Stanley, Zerohedge, Bloomberg