I was speaking with a few colleagues this week about dispersion trading. I though I had a basic understanding of what a dispersion trade was, but as we talked about it – I said to myself; it seems just like stat arb for volatility.

So, this weekend, as Gabe is sitting next to me playing his Legend of Zelda; I found this article @ Risk Latte. It says essentially what i thought – and even calls dispersion trading “volatility arbitrage”. I will not re-explain what the article says infinitely better than I could, but I thought it was interesting how simply connecting a concept you know to something you vaguely understand solidifies the understanding.

It is amazing how much I know that I do not know

-Chris

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