this makes no sense "QVR was short “the belly”: the two-to-four-month region where structured-product hedging oversupplies volatility, and long the cheaper wings further back."
Hey, yeah admittedly the wording can sound a bit loopy here. Put simply, QVR was betting on relative value across the vol term structure so sell the relatively expensive 2–4 month volatility and own cheaper volatility at shorter and longer maturities. So, as a toy example, you might sell 3-month vol at 170% IV and buy 6-month vol at 130% IV, expecting that spread to compress. “Wings” was probably imprecise wording on my part there.
this makes no sense "QVR was short “the belly”: the two-to-four-month region where structured-product hedging oversupplies volatility, and long the cheaper wings further back."
Hey, yeah admittedly the wording can sound a bit loopy here. Put simply, QVR was betting on relative value across the vol term structure so sell the relatively expensive 2–4 month volatility and own cheaper volatility at shorter and longer maturities. So, as a toy example, you might sell 3-month vol at 170% IV and buy 6-month vol at 130% IV, expecting that spread to compress. “Wings” was probably imprecise wording on my part there.
if volatility was oversupplied it would be cheap not expensive?