Volatility and the Allegory of the Prisoner's Dilemma
At the pinnacle of a multi-generational debt cycle unparalleled in the history of finance, the Prisoner’s Dilemma is the most important archetype for understanding shadow risk in modern financial markets. Volatility and the Allegory of the Prisoner's Dilemma is a masterwork tapestry depicting a great tower of civilization that rests upon a bedrock of human cooperation and competition across history. We are nearing the end of a thirty-year “monetary super-cycle” that created a “debt super-cycle”, a giant tower of babel in the capitalist system. As markets now fully price the expectation of central bank control, we are now only one voltage switch away from the razor's edge of risk. Do not fool yourself, peace is not the absence of conflict; peace can exist on the very edge of volatility.
Artemis's Volatility and the Allegory of the Prisoner's Dilemma explores conceptual ideas of convexity and self-reflexivity in modern markets, with a specific focus on equity Volatility and tail risk hedging.
It utilizes data going back hundreds of years in addition to drawing from disciplines in the worlds of quantitative finance, art, cinema, and literature to communicate an investment ideology and provide actionable ideas in today's markets.
The Prisoner's Dilemma is the most important paradigm for understanding shadow risk in modern financial markets at the pinnacle of a multi-generational debt cycle unparalleled in the history of finance.
Table of Contents
Volatility and the Allegory of the Prisoner's Dilemma
Moral Hazard in the Prisoner's Dilemma
Cosmology in the Prisoner's Dilemma
Risk Control in the Prisoner's Dilemma
Convexity and the Prisoner's Dilemma
Shadow Short Convexity in the Prisoner's Dilemma
Black Swans in the Prisoner's Dilemma
Modern Portfolio Theory in the Prisoner's Dilemma
Convexity Exposure in the Prisoner's Dilemma
Equity Valuation in the Prisoner's Dilemma
Yields in the Prisoner's Dilemma
Stock and Bond Correlations in the Prisoner's Dilemma
VIX in the Prisoner's Dilemma
Short Volatility in the Prisoner's Dilemma
Debt in the Prisoner's Dilemma
Income Inequality in the Prisoner's Dilemma
Democracy in the Prisoner's Dilemma
Escape from the Prisoner's Dilemma
Epilogue to the Prisoner's Dilemma
Appendix: Cinematic Convexity
Appendix: Allegory of the Prisoner's Dilemma Tapestry Key and Artist Commentary
Appendix: Citations and References