Is short vol the pebble that triggers an avalanche?

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In June 2007, two relatively obscure Bear Stearns mortgage funds closed. With the benefit of hindsight, this was the start of a wave of mortgage defaults that heralded the start of the financial crisis.

In October 1987, a stock market correction turned into a rout as a trading strategy called portfolio insurance saw markets accelerate lower – falling over 20% in the US and 40% in Australia.

Are the ructions in the volatility market the pebbles that are going to start the next avalanche?

The next financial crisis?

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