Keep pulling the thread on David Dredge.
The current global bond market is characterized by a "Hunger Games of bond issuance" where countries must now compete to issue sovereign debt.
In 2022, when interest rates rose, the duration of callable note structures held by institutions like Taiwanese insurance companies exploded from an accounted 5 years to a real 50 years, creating massive unrealized losses.
David Dredge believes Japan will cease to be a major buyer of foreign bonds as it will need to absorb its own government debt issuance.
David Dredge's investment philosophy is that the cheapest insurance is always located precisely where the biggest systemic risk has accumulated.
From mid-2020 to the end of Q3 2021, the best value in volatility was in interest rate vol, which was at an all-time low price.
The collapse of the Reserve Bank of Australia's 10 basis point yield curve control cap in September 2021 was the event that triggered the subsequent repricing of interest rate volatility in Europe and Japan.
David Dredge believes Japan is the most likely trigger for the next major global financial event.
David Dredge of Convex Strategies believes that regulatory frameworks, accounting treatments, and yield-seeking behavior are the structural forces that persistently create short volatility exposures in the financial system.
David Dredge asserts that banks typically fail not from taking explicit risk, but from leveraging assets they are allowed to account for as riskless.
For the last two years, topside equity volatility has been persistently cheap due to the proliferation of autocallable and covered call structured products.
The one-week-end option market for Samsung and SK Hynix in Asia is extremely volatile and active, with significant daily positioning battles among large players.
Daily trading volumes in single-name options for companies like NVIDIA are now frequently as large as the volumes for S&P 500 options.